CONCERT INVESTMENT SERIES, 485BPOS, 2000-09-11

CONCERT INVESTMENT SERIES
485BPOS, 2000-09-11

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As filed with the Securities and Exchange Commission on September 11,
2000

Registration Nos. 33-11716
811-5018

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A

REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933

Post-Effective Amendment No. 26

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940

Amendment No. 26

SMITH BARNEY INVESTMENT SERIES (Formerly, Concert Investment Series)
(Exact Name of Registrant as Specified in Declaration of Trust)

388 Greenwich Street, New York, New York 10013
(Address of Principal Executive Offices)(Zip Code)

(212) 816-6474
(Registrant's Telephone Number, Including Area Code)

CHRISTINA T. SYDOR, ESQ.
Secretary

Smith Barney Investment Series
388 Greenwich Street
New York, New York 10013
(Name and Address of Agent for Service)

Approximate Date of Proposed Public Offering: Continuous

It is proposed that this filing will become effective:

[X] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of Rule 485.

If appropriate, check the following box:

[ ] this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.

CONTENTS OF REGISTRATION STATEMENT

This Registration Statement contains the following pages and
Documents:

Front Cover

Contents Page

Part A - Prospectuses

Part B - Statements of Additional Information

Part C - Other Information

Signature Page

Exhibits

<PAGE>

Part A
PROSPECTUSES

<PAGE>
[LOGO]
Smith Barney
Mutual Funds

Your Serious Money. Professionally Managed./SM/

P R O S P E C T U S

Large Cap
Core Fund

Class A, B, L, Y and 1 Shares

February 28, 2000, as amended September 11, 2000

--------------------------------------------------------------------------------
| INVESTMENT PRODUCTS: NOT FDIC INSURED . NO BANK GUARANTEE . MAY LOSE VALUE |
--------------------------------------------------------------------------------

The Securities and Exchange Commission has not approved the fund's shares as an
investment or determined whether this prospectus is accurate or complete. Any
statement to the contrary is a crime.
<PAGE>

Large Cap Core Fund

Contents

<TABLE>
<S> <C>
Investments, risks and performance.......................................... 2

More on the fund's investments.............................................. 7

Management.................................................................. 9

Choosing a class of shares to buy........................................... 10

Comparing the fund's classes................................................ 11

Sales charges............................................................... 12

More about deferred sales charges........................................... 15

Buying shares............................................................... 16

Exchanging shares........................................................... 18

Redeeming shares............................................................ 20

Other things to know about share transactions............................... 22

Dividends, distributions and taxes.......................................... 24

Share price................................................................. 25

Financial highlights........................................................ 26
</TABLE>

Smith Barney Mutual Funds

1
<PAGE>

Investments, risks and performance

Investment objective

The fund seeks capital appreciation.

Principal investment strategies

Key investments The fund invests principally in U.S. common stocks and other
equity securities, typically of established companies with large market capi-
talizations.

Selection process The manager uses a "bottom-up" strategy, primarily focusing
on individual security selection, with less emphasis on industry and sector
allocation. The manager selects investments for their capital appreciation; any
ordinary income is incidental. In selecting individual companies for invest-
ment, the manager looks for:

.Growth characteristics, including high historic growth rates and high relative
growth compared with companies in the same industry or sector

.Value characteristics, including low price/earnings ratios and other statis-
tics indicating that a security is undervalued

.Increasing profits and sales

.Competitive advantages that could be more fully exploited by a company

.Skilled management that is committed to long-term growth

.Potential for a long-term investment by the fund

The manager uses fundamental research to find stocks with strong growth poten-
tial, and then uses quantitative analysis to determine whether these stocks are
relatively undervalued or overvalued compared to stocks with similar fundamen-
tal characteristics. The manager's quantitative valuations determine whether
and when the fund will purchase or sell the stocks that it identifies through
fundamental research. This style of stock selection is commonly known as
"growth at a reasonable price."

Large Cap Core Fund

2
<PAGE>

Principal risks of investing in the fund
Investors could lose money on their investment in the fund, or the fund may not
perform as well as other investments, if:

.Stock prices decline generally

.Large capitalization companies fall out of favor with investors

.The manager's judgment about the attractiveness, value or potential apprecia-
tion of a particular stock proves to be incorrect

.The company does not meet earnings expectations or other events depress the
value of the company's stock

The fund may engage in active and frequent trading, resulting in high portfolio
turnover. This may lead to the realization and distribution to shareholders of
higher capital gains, increasing their tax liability. Frequent trading also
increases transaction costs, which could detract from the fund's performance.

Who may want to invest The fund may be an appropriate investment if you:

.Are an aggressive investor seeking to participate in the long term growth
potential of the stock market

.Are willing to accept the risks of investing in common stocks

Smith Barney Mutual Funds

3
<PAGE>

Risk return bar chart

This bar chart shows the performance of the fund's Class 1 shares for each of
the past 10 calendar years. Past performance does not necessarily indicate how
the fund will perform in the future. Class A, B, L and Y shares have different
performance because of different expenses. The performance information in the
chart does not reflect sales charges, which would reduce your return.

Total Return for Class 1 Shares

[GRAPH]

90 -3.41%
91 38.59%
92 7.13%
93 9.37%
94 -2.29%
95 32.84%
96 18.89%
97 27.70%
98 28.50%
99 29.05%

Quarterly returns:
Highest: 23.91% in 4th quarter 1999; Lowest: (5.48)% in 3rd quarter 1999

Year to Date: 5.42% through 6/30/00

Large Cap Core Fund

4
<PAGE>

Risk return table

This table compares the average annual total return of each class for the peri-
ods shown with that of the Standard & Poor's 500 Index, a broad-based unmanaged
index of common stocks. This table assumes the imposition of the maximum sales
charge applicable to the class, the redemption of shares at the end of the
period, and the reinvestment of distributions and dividends.

Average Annual Total Returns
Calendar Years Ended December 31, 1999
<TABLE>
<CAPTION>
5 10 Since Inception
1 year years years Inception Date
<S> <C> <C> <C> <C> <C>
Class A 22.29% n/a n/a 27.15% 08/18/96
Class B 22.74% n/a n/a 27.81% 08/18/96
Class L n/a n/a n/a * *
Class Y n/a n/a n/a * *
Class 1 18.10% 25.08% 16.71% 14.68% 04/14/87
S&P 500 Index 21.03% 28.54% 18.19% 16.79% **
</TABLE>

*Classes L and Y shares' inception date is September 11, 2000.

**Index Comparison begins on 04/30/87.

Fee table
This table sets forth the fees and expenses you will pay if you invest in fund
shares.
Shareholder fees
<TABLE>
<CAPTION>
(fees paid directly from your
investment) Class A Class B Class L Class Y Class 1
<S> <C> <C> <C> <C> <C>
Maximum sales charge (load) imposed on
purchases
(as a % of offering price) 5.00% None 1.00% None 8.50%
Maximum deferred sales charge (load)
(as a % of the lower of net asset
value at purchase or redemption) None* 5.00% 1.00% None None
</TABLE>

*You may buy Class A shares in amounts of $1,000,000 or more at net asset value
(without an initial sales charge) but if you redeem those shares within 12
months of their purchase, you will pay a deferred sales charge of 1.00%.

Smith Barney Mutual Funds

5
<PAGE>

Annual fund operating expenses
<TABLE>
<CAPTION>
(expenses deducted from fund assets) Class A Class B Class L Class Y Class 1
<S> <C> <C> <C> <C> <C>
Management fee 0.55% 0.55% 0.55% 0.55% 0.55%
Distribution and service
(12b-1) fees 0.25% 1.00% 1.00% None None
Other expenses 0.21% 0.21% 0.21% 0.10% 0.21%
----- ----- ----- ----- -----
Total annual fund operating expenses 1.01% 1.76% 1.76% 0.65% 0.76%
===== ===== ===== ===== =====
</TABLE>

"Other expenses" for Class L and Y shares have been estimated for the first
full fiscal year of performance.
Example
This example helps you compare the costs of investing in the fund with the
costs of investing in other mutual funds. Your actual costs may be higher or
lower. The example assumes:

.You invest $10,000 in the fund for the period shown
.Your investment has a 5% return each year
.You reinvest all distributions and dividends without a sales charge
.The fund's operating expenses remain the same

Number of years you own your shares
<TABLE>
<CAPTION>
5
1 year 3 years years 10 years
<S> <C> <C> <C> <C>
Class A (with or without redemption) $ 598 $ 805 $1,030 $1,674
Class B (redemption at end of period) $ 679 $ 854 $1,054 $1,875
Class B (no redemption) $ 179 $ 554 $ 954 $1,875
Class L (redemption at end of period) $377 $ 649 $1,045 $2,152
Class L (no redemption) $ 277 $ 649 $1,045 $2,152
Class Y (with or without redemption) $ 66 $ 208 $ 362 $ 810
Class 1 (with or without redemption) $ 921 $1,072 $1,236 $1,712
</TABLE>

Large Cap Core Fund

6
<PAGE>

More on the fund's investments

Foreign investments The fund invests at least 65% of its assets in equity secu-
rities of foreign issuers, including those in emerging market countries.

Investments in securities of foreign entities and securities denominated in
foreign currencies involve special risks. These include possible political and
economic instability and the possible imposition of exchange controls or other
restrictions on investments. Since the fund may invest in securities denomi-
nated or quoted in currencies other than the U.S. dollar, changes in foreign
currency rates relative to the U.S. dollar will affect the U.S. dollar value of
the fund's assets. Emerging market investments offer the potential for signifi-
cant gains but also involve greater risks than investing in more developed
countries. Political or economic stability, lack of market liquidity and gov-
ernment actions such as currency controls or seizure of private business or
property may be more likely in emerging markets.

. To hedge against the economic impact of adverse changes in the market value of
its securities, because of changes in stock market prices, currency exchange
rates or interest rates.
. As a substitute for buying or selling securities
. To enhance return

Smith Barney Mutual Funds 7

<PAGE>

8 International Aggressive Growth Fund

<PAGE>

Management

Jeffrey Russell and James Conheady, investment officers of the manager and man-
aging directors of Salomon Smith Barney, have been responsible for the day-to-
day management of the fund's portfolio since 1997. Messrs. Russell and Conheady
have more than 15 and 35 years of securities business experience, respectively.

Management fee For its services, the manager received a fee during the fund's
last fiscal year equal on an annual basis to 1.00% of the fund's average daily
net assets.

Smith Barney Mutual Funds 9

<PAGE>

Choosing a class of shares to buy

You may buy shares from:

. A broker-dealer, financial intermediary, financial institution or a distribu-
tor's financial consultants (each called a "Service Agent")

. The fund, but only if you are investing through certain qualified plans or
certain Service Agents

All classes of shares are not available through all Service Agents. You should
contact your Service Agent for further information.

Investment minimums Minimum initial and additional investment amounts vary
depending on the class of shares you buy and the nature of your investment
account.

* Qualified Retirement Plans are retirement plans qualified under Section
403(b)(7) or Section 401(a) of the Internal Revenue Code, including 401(k)
plans

10 International Aggressive Growth Fund

<PAGE>

Comparing the fund's classes

Your Service Agent can help you decide which class meets your goals. The Serv-
ice Agent may receive different compensation depending upon which class you
choose.

<TABLE>
<CAPTION>
Class A Class B Class L Class Y Class 1
<S> <C> <C> <C> <C> <C>
Key features .Initial .No ini- .Initial .No ini- .Only avail-
sales tial sales tial or able to
charge sales charge is deferred eligible
.You may charge lower sales Class 1
qualify .Deferred than charge shareholders
for sales Class A .Must .You may
reduction charge .Deferred invest at qualify for
or waiver declines sales least $15 reduction
of ini- over time charge million or waiver
tial .Converts for only .Lower of initial
sales to Class 1 year annual sales
charge A after 8 .Does not expenses charge
.Lower years convert than the ..Higher
annual .Higher to Class other initial
expenses annual A classes sales
than expenses .Higher charge
Class B than annual .Lower
and Class A expenses annual
Class L than expenses
Class A than Class
A, B and L
----------------------------------------------------------------------------------
Initial sales charge Up to None 1.00% None Up to 8.50%
5.00%; reduced for
reduced large pur-
for large chases
purchases
and waived
for cer-
tain
investors.
No charge
for pur-
chases of
$1,000,000
or more
----------------------------------------------------------------------------------
Deferred sales charge 1.00% on Up to 1.00% if None None
purchases 5.00% you redeem
of charged within 1
$1,000,000 when you year of
or more if redeem purchase
you redeem shares.
within 1 The charge
year of is reduced
purchase over time
and there
is no
deferred
sales
charge
after 6
years
----------------------------------------------------------------------------------
Annual Distribution and 0.25% of 1.00% of 1.00% of None None
service fees average average average
daily net daily net daily net
assets assets assets
----------------------------------------------------------------------------------
Exchange Privilege* Class A Class B Class L Class Y Class 1
shares shares shares shares Shares of
of most of most of most of most Smith Barney
Smith Smith Smith Smith funds that
Barney Barney Barney Barney offer Class
funds funds funds funds 1 shares and
Class A
shares of
certain
other Smith
Barney
mutual funds
----------------------------------------------------------------------------------
</TABLE>
* Ask your Service Agent for the Smith Barney funds available for exchange.

Smith Barney Mutual Funds 11

<PAGE>

Sales charges

The table below shows the rate of sales charge you pay, depending on the amount
you purchase.

*A distributor pays up to 1.00% to a Service Agent.

12 International Aggressive Growth Fund

<PAGE>

Accumulation privilege - lets you combine the current value of Class A shares
owned

. by you, or
. by members of your immediate family,

Waivers for certain Class A investors Class A initial sales charges are waived
for certain types of investors, including:

If you want to learn about additional waivers of Class A initial sales charges,
contact your Service Agent or consult the Statement of Additional Information
("SAI").

<TABLE>
<CAPTION>
Year after purchase 1st 2nd 3rd 4th 5th 6th through 8th
<S> <C> <C> <C> <C> <C> <C>
Deferred sales charge 5% 4% 3% 2% 1% 0%
</TABLE>

Smith Barney Mutual Funds 13

<PAGE>

Class L shares (available through certain Service Agents)

You buy Class L shares at the offering price, which is the net asset value plus
a sales charge of 1% (1.01% of the net amount invested). In addition, if you
redeem your Class L shares within one year of purchase, you will pay a deferred
sales charge of 1%. If you held Class C shares of the fund and/or other Smith
Barney mutual funds on June 12, 1998, you will not pay an initial sales charge
on Class L shares you buy before June 22, 2001.

Class Y shares (available through certain Service Agents)

You buy Class Y shares at net asset value with no initial sales charge and no
deferred sales charge when you redeem. You must meet the $15,000,000 initial
investment requirement. You can use a letter of intent to meet this requirement
by buying Class Y shares of the fund over a 13-month period. To qualify, you
must initially invest $5,000,000.

14 International Aggressive Growth Fund

<PAGE>

Class 1 shares (available through certain Service Agents)

You pay a lower sales charge as the size of your investment increases to cer-
tain levels called breakpoints.

More about deferred sales charges

In addition, you do not pay a deferred sales charge on:

. Shares exchanged for shares of another Smith Barney fund
. Shares representing reinvested distributions and dividends
. Shares no longer subject to the deferred sales charge

If you redeemed shares of a Smith Barney fund in the past 60 days and paid a
deferred sales charge, you may buy shares of the fund at the current net

Smith Barney Mutual Funds 15

<PAGE>

asset value and be credited with the amount of the deferred sales charge, if
you notify your Service Agent.

The fund's distributors receive deferred sales charges as partial compensation
for their expenses in selling shares, including the payment of compensation to
your Service Agent.

Deferred sales charge waivers
The deferred sales charge for each share class will generally be waived:

. On payments made through certain systematic withdrawal plans
. On certain distributions from a retirement plan

. For 12 months following the death or disability of a shareholder

If you want to learn more about additional waivers of deferred sales charges,
contact your Service Agent or consult the SAI.

Buying shares

Through a You should contact your Service Agent to open a brokerage
Service Agent account and make arrangements to buy shares.

If you do not provide the following information, your order
will be rejected:

.Class of shares being bought
.Dollar amount or number of shares being bought

.Write the fund at the following address:
Smith Barney Investment Series International Aggressive
Growth Fund
(Specify class of shares)
c/o PFPC Global Fund Services
P.O. Box 9699
Providence, RI 02940-9699

16 International Aggressive Growth Fund

<PAGE>

. Enclose a check to pay for the shares. For initial pur-
chases, complete and send an account application

For more information, contact your Service Agent or the
transfer agent or consult the SAI.

Smith Barney Mutual Funds 17

<PAGE>

Exchanging shares

. You must meet the minimum investment amount for each fund
(except for systematic investment plan exchanges).

18 International Aggressive Growth Fund

<PAGE>

the close of regular trading on the Exchange are priced at
the net asset value next determined.

Smith Barney Mutual Funds 19

<PAGE>

Redeeming shares

Generally Contact your Service Agent to redeem shares of the fund.

If you hold share certificates, the sub-transfer agent must
receive the certificates endorsed for transfer or with signed
stock powers before the redemption is effective.

If the shares are held by a fiduciary or corporation, other
documents may be required.

For clients of a PFS Investments Registered Representative,
write PFS Shareholder Services at the following address:

PFS Shareholder Services
P.O. Box 105043
Atlanta, GA 30348-5043

For all other investors, send your request to PFPC Global
Fund Services at the following address:

Smith Barney Investment Series
International Aggressive Growth Fund
(Specify class of shares)
c/o PFPC Global Fund Services
P.O. Box 9699
Providence, RI 02940-9699

20 International Aggressive Growth Fund

<PAGE>

Your written request must provide the following:

The following conditions apply:

. Your shares must not be represented by certificates
. All dividends and distributions must be reinvested

For more information, contact your Service Agent or consult
the SAI.

Smith Barney Mutual Funds 21

<PAGE>

Other things to know about share transactions

When you buy, exchange or redeem shares, your request must be in good order.
This means you have provided the following information without which your
request will not be processed:

Signature guarantees To be in good order, your redemption request must include
a signature guarantee if you:

You can obtain a signature guarantee from most banks, dealers, brokers, credit
unions and federal savings and loan institutions, but not from a notary public.

The fund has the right to:

22 International Aggressive Growth Fund

<PAGE>

. Pay redemption proceeds by giving you securities. You may pay transaction
costs to dispose of the securities.

Smith Barney Mutual Funds 23

<PAGE>

Dividends, distributions and taxes

Taxes In general, redeeming shares, exchanging shares and receiving distribu-
tions (whether in cash or additional shares) are all taxable events.

24 International Aggressive Growth Fund

<PAGE>

Share price

International markets may be open on days when U.S. markets are closed and the
value of foreign securities owned by the fund could change on days when you
cannot buy or redeem shares.

Service Agents must transmit all orders to buy, exchange or redeem shares to
the fund's sub-transfer agents before the sub-transfer agents' close of busi-
ness.

Smith Barney Mutual Funds 25

<PAGE>

Financial highlights

The financial highlights tables are intended to help you understand the perfor-
mance of each class for the past 5 years or since inception. Certain informa-
tion reflects financial results for a single share. Total return represents the
rate that a shareholder would have earned (or lost) on a fund share assuming
reinvestment of all dividends and distributions. The information in the follow-
ing tables, unless otherwise indicated, was audited by Ernst & Young LLP, inde-
pendent auditors whose report, along with the fund's financial statements, is
included in the annual report (available upon request).

For a Class 1 share of capital stock outstanding throughout each year
(except where noted) ended October 31:
<TABLE>
<CAPTION>
August 8,
1996
(Commencement
Six Months of
Ended Distribution)
April 30, to October
2000(/1/) 1999 1998(/4/) 1997 31, 1996
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $32.57 $19.06 $18.16 $16.52 $16.00
-----------------------------------------------------------------------------------------------
Income from operations:
Net investment income
(loss) (0.19)(/2/) (0.28)(/2/) (0.21) (0.17) (0.03)(/2/)
Net realized and
unrealized gain 15.84 13.79 1.11 1.81 0.55
-----------------------------------------------------------------------------------------------
Total income from
operations 15.65 13.51 0.90 1.64 0.52
-----------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- -- -- -- --
Net realized gains (0.74) -- -- -- --
-----------------------------------------------------------------------------------------------
Total distributions (0.74) -- -- -- --
-----------------------------------------------------------------------------------------------
Net asset value, end of
period $47.48 $32.57 $19.06 $18.16 $16.52
-----------------------------------------------------------------------------------------------
Total return 48.09%(/3/) 70.88% 4.96% 9.99% 3.25%(/3/)
-----------------------------------------------------------------------------------------------
Net assets, end of
period (millions) $9 $4 $2 $2 $0.2
-----------------------------------------------------------------------------------------------
Ratios to average net
assets*:
Expenses 1.32%+ 1.68% 1.79% 2.26% 2.50%+
Net investment (loss) (0.81)+ (1.12) (0.99) (1.24) (1.31)+
-----------------------------------------------------------------------------------------------
Portfolio turnover rate 15% 50% 63% 57% 78%
-----------------------------------------------------------------------------------------------
* If certain expenses
had not been waived or
reimbursed by the
Fund's former manager,
total return would
have been lower and
the ratios would have
been as follows:
-----------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets N/A N/A N/A N/A 3.87%+
-----------------------------------------------------------------------------------------------
Ratio of net investment
loss to average net
assets N/A N/A N/A N/A (2.67)+
-----------------------------------------------------------------------------------------------
</TABLE>
(/1/) Unaudited.
(/2/) Net investment income (loss) has been calculated using the monthly
average share method.
(/3/) Total return is not annualized, as it may not be representative of the
total return for the year.

(/4/Effective)December 31, 1997, SSB Citi Fund Management LLC (successor to
SSBC Fund Management Inc., formerly known as Mutual Management Corp.),
replaced Van Kampen American Capital Asset Management as the Fund Manager.

N/A=Not Applicable
+Annualized.

26 International Aggressive Growth Fund

<PAGE>

For a Class A share of capital stock outstanding throughout each year
(except where noted) ended October 31:
<TABLE>
<CAPTION>
February 21, 1995
Six Months (Commencement of
Ended Investment
April 30, Operations) to
2000(/1/) 1999 1998(/5/) 1997 1996 October 31, 1995
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $32.24 $18.94 $18.14 $16.54 $13.86 $11.81
------------------------------------------------------------------------------------------------------------
Income from operations:
Net investment income
(loss) (0.28)(/2/) (0.37)(/2/) (0.27) (0.26) (0.19) (0.14)(/2/)
Net realized and
unrealized gain 15.70 13.67 1.07 1.86 2.87 2.19
------------------------------------------------------------------------------------------------------------
Total income from
operations 15.42 13.30 0.80 1.60 2.68 2.05
------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income -- -- -- -- -- --
Net realized gains (0.74) -- -- -- -- --
------------------------------------------------------------------------------------------------------------
Total distributions (0.74) -- -- -- -- --
------------------------------------------------------------------------------------------------------------
Net asset value, end of
period $46.92 $32.24 $18.94 $18.14 $16.54 $13.86
------------------------------------------------------------------------------------------------------------
Total return 47.86%(/3/) 70.22% 4.41% 9.74% 19.34% 16.28%(/4/)
------------------------------------------------------------------------------------------------------------
Net assets, end of
period (millions) $84 $38 $20 $17 $10 $7
------------------------------------------------------------------------------------------------------------
Ratios to average net
assets:
Expenses 1.62%+ 2.08% 2.25% 2.56% 2.75% 3.64%+
Net investment (loss) (1.14)+ (1.53) (1.46) (1.59) (1.56) (1.40)+
------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 15% 50% 63% 57% 78% 17%
------------------------------------------------------------------------------------------------------------
* If certain expenses
had not been waived or
reimbursed by the
Fund's former manager,
Total Return would
have been lower and
the ratios would have
been as follows:
------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets N/A N/A N/A N/A 4.12% 5.97%+
------------------------------------------------------------------------------------------------------------
Ratio of net investment
loss to average net
assets N/A N/A N/A N/A (2.92) (3.73)+
------------------------------------------------------------------------------------------------------------
</TABLE>

(/1/Unaudited.)
(/2/Net)investment loss has been calculated using the monthly average share
method.
(/3/Total)return is not annualized, as it may not be representative of the
total return for the year.
(/4/Total)return from March 17, 1995 (date the Fund's Investment strategy was
implemented) through October 31, 1995 without annualization.

(/5/Effective)December 31, 1997, SSB Citi Fund Management LLC (successor to
SSBC Fund Management Inc., formerly known as Mutual Management Corp.),
replaced Van Kampen American Capital Asset Management as the Fund Manager.

N/A=Not Applicable
+ Annualized.

Smith Barney Mutual Funds 27

<PAGE>

For a Class B share of capital stock outstanding throughout each year
(except where noted) ended October 31:
<TABLE>
<CAPTION>
February 21, 1995
Six Months (Commencement
Ended of Investment
April 30, Operations) to
2000(/1/) 1999 1998(/5/) 1997 1996 October 31, 1995
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $31.16 $18.44 $17.81 $16.36 $13.79 $11.81
-------------------------------------------------------------------------------------------------------------
Income from operations
Net investment income
(loss) (0.43)(/2/) (0.53)(/2/) (0.39) (0.32) (0.26) (0.21)(/2/)
Net realized and
unrealized gain 15.16 13.25 1.02 1.77 2.83 2.19
-------------------------------------------------------------------------------------------------------------
Total income from
operations 14.73 12.72 0.63 1.45 2.57 1.98
-------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- -- -- --
Net realized gains (0.74) -- -- -- -- --
-------------------------------------------------------------------------------------------------------------
Total Distributions (0.74) -- -- -- -- --
-------------------------------------------------------------------------------------------------------------
Net Asset Value, End of
Period $45.15 $31.16 $18.44 $17.81 $16.36 $13.79
-------------------------------------------------------------------------------------------------------------
Total Return 47.30%(/4/) 68.98% 3.54% 8.93% 18.64% 15.69(/4/)
-------------------------------------------------------------------------------------------------------------
Net Assets, End of
Period (millions) $113 $41 $18 $13 $8 $2
-------------------------------------------------------------------------------------------------------------
Ratios to average net
assets:
Expenses 2.34%+ 2.79% 3.11% 3.30% 3.50% 4.33%+
Net investment (loss) (1.83)+ (2.26) (2.32) (2.34) (2.31) (2.80)+
-------------------------------------------------------------------------------------------------------------
Portfolio Turnover 15% 50% 63% 57% 78% 17%(/3/)
-------------------------------------------------------------------------------------------------------------
* If certain expenses
had not been waived or
reimbursed by the
fund's former manager,
Total Return would
have been lower and
the ratios would have
been as follows:
-------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets N/A N/A N/A N/A 4.87% 6.67%+
-------------------------------------------------------------------------------------------------------------
Ratio of net investment
loss to average net
assets N/A N/A N/A N/A (3.67)% (5.13)%+
-------------------------------------------------------------------------------------------------------------
</TABLE>

(/1/Unaudited.)
(/2/Net)investment loss has been calculated using the monthly average share
method.
(/3/Not)annualized.
(/4/Total)return is not annualized, as it may not be representative of the
total return for the year.

N/A=Not Applicable
+ Annualized.

28 International Aggressive Growth Fund

[LOGO OF SALOMON SMITH BARNEY]

International Aggressive Growth Fund

An investment portfolio of Smith Barney Investment Series

The fund sends only one report to a household if more than one account has the
same address. Contact your Service Agent or the transfer agent if you do not
want this policy to apply to you.

SMSalomon Smith Barney is a service mark of Salomon Smith Barney Inc.

(Investment Company Act file no. 811-05018)
SB-16 9/00

Part B
STATEMENTS OF ADDITIONAL INFORMATION

Smith Barney
Investment Series
388 Greenwich Street
New York, New York 10013
800 451-2010

Statement of Additional Information

February 28, 2000, as amended

September 11, 2000
This Statement of Additional Information expands upon and supplements the
information contained in the current Prospectuses of Smith Barney
Investment Series (formerly, Concert Investment Series) (the "Company"),
for Smith Barney Large Cap Core Fund (formerly, Growth Fund) ("Large Cap
Fund"); Smith Barney Growth and Income Fund (formerly, Growth and Income
Fund) ("Growth and Income fund"); and Smith Barney International
Aggressive Growth (formerly, International Equity Fund) ("International
Fund") each dated February 28, 2000 as amended September 11, 2000, and
should be read in conjunction with the Company's Prospectuses. The
Company issues a Prospectus for each of the funds offered by the Company
(the "Funds"). The Company's Prospectuses may be obtained by contacting
your Service Agent, by calling the Fund's sub-transfer agents (PFS
Shareholder Services at 1-800-544-5445 or PFPC Global Fund Services at 1-
800-451-2010), or by writing to the fund at Smith Barney Mutual funds, 388
Greenwich Street, MF2, New York, New York 10013. This Statement of
Additional Information, although not in itself a prospectus, is
incorporated by reference in its entirety into each Fund's Prospectus.

CONTENTS
For ease of reference, the same section headings are used in the
Prospectuses and this Statement of Additional Information, except where
shown below:

Trustees and Executive Officers of the Company 2
Investment Objectives and Management Policies 5
Risk Factors 23
Investment Restrictions 28
Brokerage 33
Portfolio Turnover 37
Distributor 38
Determination of Net Asset Value 43
Purchase and Redemption of Shares 44
Exchange Privilege 56
Redemption of Shares 58
Distributions and Federal Taxes 62
Other Information 66
Financial Statements 72
Appendix A-1

TRUSTEES AND EXECUTIVE OFFICERS OF THE COMPANY

The names of the Trustees and executive officers of the Company, together
with information as to their principal business occupations during the
past five years, are shown below. Each Trustee who is an "interested
person" of the Company, as defined in the Investment Company Act of 1940,
as amended (the "1940 Act"), is indicated by an asterisk.

Donald M. Carlton, Trustee. Radian International L.L.C., 8501 N. Mopac
Blvd., Building No. 6, Austin, Texas 78759. President and Chief Executive
of Radian International L.L.C. (chemical engineering). Director of
National Instruments Corp. and Central and Southwest Corporation.
Formerly Director of the Hartford Steam Boiler Inspection and Insurance
Company (insurance/engineering services); 62.

A. Benton Cocanougher, Trustee. Texas A&M University, 601 Blocker Bldg.,
College Station, Texas 77843-4113. Dean of College of Business
Administration and Graduate School of Business of Texas A&M University;
Director of Randall's Food Markets, Inc.; Director of First American
Bank; and Director of First American Savings Bank; 61.

Stephen Randolph Gross, Trustee. 2625 Cumberland Parkway, Suite 400,
Atlanta, Georgia 30339. Managing Partner of Gross, Collins & Cress, P.C.
(accounting); Director of Charter Bank & Trust; 52

*Heath B. McLendon, Chairman of the Board, President and Chief Executive
Officer (Age 66). Managing Director of Salomon Smith Barney Inc. ("Salomon
Smith Barney"); Director and President of SSB Citi Fund Management LLC
("SSB Citi"or the "Manager") and Travelers Investment Adviser, Inc.
("TIA"); and formerly Chairman of the Board of Smith Barney Strategy
Advisers Inc. Mr. McLendon is a director of 71 investment companies
associated with Citigroup Inc ("Citigroup"). His address is 7 World Trade
Center, New York, New York 10048.

Alan G. Merten, Trustee. George Mason University, 4400 University Drive,
Fairfax, Virginia 22030-4444. President of George Mason University.
Director of Comshare, Inc. (information technology), and Tompkins County
Trust Company, Ithaca, New York; formerly The Anne and Elmer Lindseth Dean
of Johnson Graduate School of Management of Cornell University; 58

R. Richardson Pettit. Trustee. Department of Finance, College of
Business, University of Houston, 4800 Calhoun, Houston, Texas 77204-6283.
Duncan Professor of Finance of the University of Houston; formerly Hanson
Distinguished Professor of Business of the University of Washington; 57.

James E. Conroy, Vice President and Investment Officer (Age 48). Managing
Director of Salomon Smith Barney; Mr. Conroy serves as Investment Officer
of four Smith Barney Mutual Funds. His address is 388 Greenwich Street,
New York, New York 10013.

Michael Kagan, Vice President and Investment Officer (Age 40). Director
of Salomon Smith Barney; Mr. Kagan is Vice President and Investment
Officer of three other Smith Barney Mutual Funds. His address is 7 World
Trade Center, New York, NY 10048.

Jeffrey Russell, Vice President and Investment Officer (Age 42). Managing
Director of Salomon Smith Barney; Mr. Russell is Vice President and
Investment Officer of six other Smith Barney Mutual Funds. His address is
7 World Trade Center, New York, New York 10048

Larry Weissman, Vice President and Investment Officer; (Age 38). Managing
Director of Salomon Smith Barney; Prior to October 1997, Portfolio Manager
of Newberger & Berman LLC; Prior to 1995, Portfolio Manager of College
Retirement Equities Fund. His address 388 Greenwich Street, New York, New
York 10013.

Lewis E. Daidone, Senior Vice President and Treasurer (Age 42). Managing
Director of Salomon Smith Barney, Director and Senior Vice President of
SSB Citi and TIA. Treasurer of 61 investment companies associated with
Citigroup. His address is 125 Broad Street, New York, New York 10004.

Paul Brook, Controller (Age 45). Director of Salomon Smith Barney;
Controller or Assistant Treasurer of 43 investment companies associated
with Citigroup; from 1997-1998 Managing Director of AMT Capital Services
Inc.; prior to 1997 Partner with Ernst & Young LLP; His address is 125
Broad Street, New York, New York
10004.

Christina T. Sydor, Secretary (Age 48). Managing Director of Salomon Smith
Barney; General Counsel and Secretary of SSB Citi and TIA. Secretary of 61
investment companies associated with Citigroup. Her address is 388
Greenwich Street, New York, New York 10013.

As of August 30, 2000, the Trustees and officers of the Company, as a
group, owned less than 1.00% of the outstanding common stock of the
Company.

As of August 30, 2000 to the best knowledge of the Funds and the Board of
Trustees, no single shareholder or group (as the term is used in Section
13(d) of the Securities Act of 1934) beneficially owned more than 5% of
the outstanding shares of the Funds.

No officer, Trustee or employee of Salomon Smith Barney or any parent or
subsidiary receives any compensation from the Company for serving as an
officer or Trustee of the Company. The Company pays each Trustee who is
not an officer, director or employee of Salomon Smith Barney or any of its
affiliates a fee of $48,000 per annum plus $2,000 per each Board of
Trustees meeting attended, $1000 for each Committee meeting attended (each
Committee chairman is paid an additional $300 for each Committee meeting
attended), $1000 for each telephonic Board meeting in which participated
(unless such meeting is for information purposes only in which case $100
is paid). In addition, the Funds will reimburse Trustees for travel and
out-of-pocket expenses incurred in connection with Board of Trustees
meetings. During the fiscal year ended October 31, 1999 such expenses
totaled $ 14,368. With the exception of Mr. McLendon, no Trustee serves on
the Board of any other investment company in the Smith Barney Fund
Complex. For the fiscal year ended October 31, 1999, the Trustees of the
Company were paid the following compensation:

COMPENSATION TABLE

Name of Person
Retirement Benefits
Accrued as Part of Fund
Expenses
Compensation from Company and
Complex Paid to Trustees
Donald Carlton
(1)
56,000
A. Benton
Cocanougher
(1)
57,000
Stephen Randolph
Gross
(1)

59,000
Heath B.
McLendon*
(1)
0
Alan G. Merten
(1)
56,000
R. Richardson
Pettit
(1)
59,000

*Designates an "Interested Person" of the Company, as defined under the
1940 Act.

(1) The Trustees instituted a retirement plan effective April 1, 1996.
For the Current Trustees who are not "interested persons" of the Company,
the retirement benefits payable thereunder are payable for a ten year
period following retirement, with the annual payment to be based upon the
highest total annual compensation received in any of the three calendar
years preceding retirement. Trustees with more than five but less than ten
years of service at retirement will receive a prorated benefit. Total
aggregate retirement benefits accrued under the plan for the 1999 fiscal
year were $1, 570,818. The amount of benefits to be paid upon retirement
is therefore not currently determinable for any current Trustee.

Investment Adviser and Administrator
SSB Citi serves as investment adviser to the Company pursuant to separate
advisory agreements for each of the Funds (the "Advisory Agreements").
SSB Citi is a wholly owned subsidiary of Salomon Smith Barney Holdings
Inc. ("Holdings") (formerly Smith Barney Holdings). Holdings is a wholly
owned subsidiary of Citigroup. As of May 31, 2000 SSB Citi had aggregate
assets under management in excess of $ 128 billion. The Advisory
Agreements were most recently approved by the Board of Trustees, including
a majority of the Trustees who are not "interested persons" of the Company
or the investment advisers (the "Independent Trustees"), on June 12, 2000.
SSB Citi bears all expenses in connection with the performance of its
services. Under the Advisory Agreements, the Company retains the manager
to manage the investment of its assets and to place orders for the
purchase and sale of its portfolio securities. The manager is responsible
for obtaining and evaluating economic, statistical, and financial data and
for formulating and implementing investment programs in furtherance of
each Company's investment objectives. The manager also furnishes at no
cost to the Company (except as noted herein) the services of sufficient
executive and clerical personnel for the Company as are necessary to
prepare registration statements, prospectuses, shareholder reports, and
notices and proxy solicitation materials. In addition, the manager
furnishes at no cost to the Company the services of a President of the
Company, one or more Vice Presidents as needed, and a Secretary. SSB Citi
provides investment advisory and management services to investment
companies affiliated with Salomon Smith Barney.
As compensation for investment advisory services rendered to Large Cap and
Growth and Income Funds (calculated separately for each fund), each Fund
pays SSB Citi a fee computed daily and paid monthly at the following
annual rates of average daily net assets: 0.65% up to $1 billion; 0.60%
on the next $1 billion; 0.55% on the next $1 billion; 0.50% on the next $1
billion; and 0.45% on net assets thereafter.

As compensation for investment advisory services rendered to International
Fund, the Fund pays SSB Citi a fee computed daily and paid monthly at
1.00% annually of average daily net assets.

For the fiscal years ended October 31, 1997, 1998 and 1999, the Funds
accrued advisory fees as follows:

Fund

1997

1998

1999

Large Cap Fund

$ 20,953,587

$ 23,343,634
$26,462,719

Growth and Income Fund

7,735,957

8,627,108
9,381,462
International Fund

289,498

376,585
545,582
For the fiscal year ended October 31,1997 and for the period from November
1,1997 to December 31, 199, amounts paid by the Funds under the relevant
investment advisory agreements were paid to Van Kampen American Capital
Asset Management Inc.("VKAC"). VKAC served as the Company's investment
adviser until December 31, 1997, when the SSB Citi replaced VKAC as the
manager of each Fund. Prior to December 31, 1997, SSB Citi acted as the
Sub-Adviser to International Fund.

Code of Ethics
Pursuant to Rule 17j-1 of the 1940 Act, the fund, the investment adviser
and principal underwriter have adopted codes of ethics that permit
personnel to invest in securities for their own accounts, including
securities that may be purchased or held by the fund. All personnel must
place the interests of clients first and avoid activities, interests and
relationships that might interfere with the duty to make decisions in the
best interests of the clients. All personal securities transactions by
employees must adhere to the requirements of the codes and must be
conducted in such a manner as to avoid any actual or potential conflict of
interest, the appearance of such a conflict, or the abuse of an employee's
position of trust and responsibility.

A copy of the fund's code of ethics is on file with the SEC.

Independent Auditors
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019, has been
selected as the Fund's independent auditor to examine and report on the
Funds' financial statements and highlights for the fiscal year ending
October 31, 2000.

INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES

The Prospectuses discuss the investment objectives of each Fund and the
policies they employ to achieve such objectives. The following discussion
supplements the description of the Funds' investment objectives and
management policies contained in the Prospectuses.The Funds may engage in
these and any other practices not prohibited by their investment
restrictions. Investment objectives and Management Policies may be changed
by the Trustees without Shareholder approval. For further information
regarding the risks associated with these practices, see "Risk Factors"
below.

GENERAL

International Fund

International Fund seeks total return on its assets from growth of capital
and income. The Fund seeks to achieve its goal by investing at least 65%
of its assets in a diversified portfolio of equity securities of
established non-United States issuers.

In seeking to achieve its goal, the Fund presently expects to invest at
least 65% and substantially all of its assets in common stocks of
established non-United States companies which in the opinion of the
manager have potential for growth of capital. However, there is no
requirement that the Fund invest exclusively in common stocks or other
equity securities and, if deemed advisable, the Fund may invest up to 35%
of its assets in bonds, notes and other debt securities (including
securities issued in the Eurocurrency markets or obligations of the United
States or foreign governments and their political subdivisions). When the
manager believes that the return on debt securities will equal or exceed
the return on common stocks, the Fund may, in seeking its goal of total
return, substantially increase its holdings (up to a maximum of 35% of its
assets) in such debt securities. In determining whether the Fund will be
invested for capital appreciation or for income or any combination of
both, the manager regularly analyzes a broad range of international equity
and fixed income markets in order to assess the degree of risk and level
of return that could be expected from each market.

The Fund generally invests its assets broadly among countries and normally
has represented in the portfolio business activities in not less than
three foreign countries. The Fund normally invests at least 65% of its
assets in companies organized or governments located in any area of the
world other than the United States, such as the Far East (e.g., Japan,
Hong Kong, Singapore, Malaysia), Western Europe (e.g., United Kingdom,
Germany, The Netherlands, France, Italy, Switzerland), Eastern Europe
(e.g., Hungary, Poland, The Czech Republic and certain countries of the
former Soviet Union), Central and South America (e.g., Mexico, Chile and
Venezuela), Australia, Canada and such other areas and countries as the
manager may determine from time to time. Allocation of the Fund's
investments will depend upon the relative attractiveness of the
international markets and particular issuers. Concentration of the Fund's
assets in one or a few countries or currencies will subject the Fund to
greater risks than if the Fund's assets were not geographically
concentrated.

It is expected that portfolio securities will ordinarily be traded on a
stock exchange or other market in the country in which the issuer is
principally based, but may also be traded on markets in other countries
including, in many cases, the United States securities exchanges and over-
the-counter markets. To the extent that the Fund's assets are not
otherwise invested as described above, the assets may be held in cash, in
any currency, or invested in United States as well as foreign high quality
money market instruments and equivalents.

Large Cap Fund

Large Cap Fund seeks capital appreciation through investments in common
stocks and options on common stocks. Any income realized on its
investments will be purely incidental to its goal of capital appreciation.

The Fund also may hold a portion of its assets in high grade short-term
debt securities and high grade corporate or government bonds in order to
provide liquidity. The amount of assets the Fund may hold for liquidity
purposes is based on market conditions and the need to meet redemption
requests. A description of the ratings of commercial paper and bonds is
contained in the Appendix. Short term investments may include repurchase
agreements with banks or broker-dealers.
Certain policies of the Fund, such as purchasing and selling options on
stocks, purchasing options on stock indices and purchasing stock index
futures contracts and options thereon involve inherently greater
investment risk and could result in more volatile price fluctuations. The
Fund may also invest up to 20% of its total assets in securities of
foreign issuers and in investment companies. Since the Fund may take
substantial risks in seeking its goal of capital appreciation, it is not
suitable for investors unable or unwilling to assume such risks.

Growth and Income Fund

Growth and Income Fund seeks reasonable growth and income through
investments in equity securities that provide dividend or interest income,
including common and preferred stocks and securities convertible into
common and preferred stocks.

Convertible securities rank senior to common stocks in a corporation's
capital structure. They are consequently of higher quality and entail
less risk than the corporation's common stock, although the extent to
which such risk is reduced depends in large measure upon the degree to
which the convertible security sells above its value as a fixed income
security. The Fund may purchase convertible securities rated Ba or lower
by Moody's Investors Service, Inc. ("Moody's") or BB or lower by Standard
& Poor's Ratings Group ("S&P") and may also purchase non-rated securities
considered by the manager to be of comparable quality. Although the Fund
selects these securities primarily on the basis of their equity
characteristics, investors should be aware that debt securities rated in
these categories are considered high risk securities; the rating agencies
consider them speculative, and payment of interest and principal is not
considered well assured. To the extent that such convertible securities
are acquired by the Fund, there is a greater risk as to the timely payment
of the principal of, and timely payment of interest or dividends on, such
securities than in the case of higher rated convertible securities.

Although the portfolio turnover rate will not be considered a limiting
factor, the Fund does not intend to engage in trading directed at
realizing short-term profits. Nevertheless, changes in the portfolio will
be made promptly when determined to be advisable by reason of developments
not foreseen at the time of the investment decision, and usually without
reference to the length of time the security has been held.

The Fund may hold a portion of its assets in high grade short-term debt
securities and high grade corporate or government bonds in order to
provide liquidity. The amount of assets the Fund may hold for liquidity
purposes is based on market conditions and the need to meet redemption
requests. Short-term investments may include repurchase agreements with
banks or broker-dealers. The Fund may also invest up to 20% of its total
assets in securities of foreign issuers and in investment companies. The
Fund may engage in portfolio management strategies and techniques
involving options, futures contracts and options on futures.

EQUITY SECURITIES (All Funds except as otherwise noted)

Common Stocks Common stocks are shares of a corporation or other entity
that entitle the holder to a pro rata share of the profits of the
corporation, if any, without preference over any other shareholder or
class of shareholders, including holders of the entity's preferred stock
and other senior equity. Common stock usually carries with it the right
to vote and frequently an exclusive right to do so.

Preferred Stocks and Convertible Securities Convertible debt securities
and preferred stock entitle the holder to acquire the issuer's stock by
exchange or purchase for a predetermined rate. Convertible securities are
subject both to the credit and interest rate risks associated with fixed
income securities and to the stock market risk associated with equity
securities.

Warrants Warrants acquired by a Fund entitle it to buy common stock from
the issuer at a specified price and time. Warrants are subject to the
same market risks as stocks, but may be more volatile in price. A Fund's
investment in warrants will not entitle it to receive dividends or
exercise voting rights and will become worthless if the warrants cannot be
profitably exercised before the expiration dates.

REITs Real estate investment trusts ("REITs") are pooled investment
vehicles that invest in real estate or real estate loans or interests.
Investing in REITs involves risks similar to those associated with
investing in equity securities of small capitalization companies. REITs
are dependent upon management skills, are not diversified, and are subject
to risks of project financing, default by borrowers, self-liquidation, and
the possibility of failing to qualify for the exemption from taxation on
distributed amounts under the Internal Revenue Code of 1986, as amended
(the "Code").

FIXED INCOME SECURITIES (All Fund except as otherwise noted)

Corporate Debt Obligations Corporate debt obligations are subject to the
risk of an issuer's inability to meet principal and interest payments on
the obligations and may also be subject to price volatility due to such
factors as market interest rates, market perception of the
creditworthiness of the issuer and general market liquidity. Zero coupon
securities are securities sold at a discount to par value and on which
interest payments are not made during the life of the security.

U.S. Government Securities The U.S. Government securities in which the
Funds may invest include bills, certificates of indebtedness, and notes
and bonds issued by the U.S. Treasury or by agencies or instrumentalities
of the U.S. Government. Some U.S. Government securities, such as U.S.
Treasury bills and bonds, are supported by the full faith and credit of
the U.S. Treasury; others are supported by the right of the issuer to
borrow from the U.S. Treasury; others are supported by the discretionary
authority of the U.S. Government to purchase the agency's obligations;
still others are supported only by the credit of the instrumentality.

Short-Term Investments In certain circumstances the Funds may invest
without limitation in all types of short-term money market instruments,
including U.S. Government securities; certificates of deposit, time
deposits and bankers' acceptances issued by domestic banks (including
their branches located outside the United States and subsidiaries located
in Canada), domestic branches of foreign banks, savings and loan
associations and similar institutions; high grade commercial paper; and
repurchase agreements. To the extent a Fund is investing in short-term
investments as a temporary defensive posture, the applicable Fund's
investment objective may not be achieved.
Commercial Paper Commercial paper consists of short-term (usually 1 to
270 days) unsecured promissory notes issued by corporations in order to
finance their current operations. A variable amount master demand note
(which is a type of commercial paper) represents a direct borrowing
arrangement involving periodically fluctuating rates of interest under a
letter agreement between a commercial paper issuer and an institutional
lender, such as one of the Funds pursuant to which the lender may
determine to invest varying amounts. Transfer of such notes is usually
restricted by the issuer, and there is no secondary trading market for
such notes. Each Fund therefore, may only invest in a master demand note
to the extent that the investment would not violate the Fund's limits on
restricted and illiquid securities.

Commercial Bank Obligations (International Fund) For the purposes of the
International Fund's investment policies with respect to bank obligations,
obligations of foreign branches of U.S. banks and of foreign banks may be
general obligations of the parent bank in addition to the issuing bank, or
may be limited by the terms of a specific obligation and by government
regulation. As with investment in foreign securities in general,
investments in the obligations of foreign branches of U.S. banks and of
foreign banks may subject the International Fund to investment risks that
are different in some respects from those of investments in obligations of
domestic issuers. Although the Fund will typically acquire obligations
issued and supported by the credit of U.S. or foreign banks having total
assets at the time of purchase in excess of U.S. $1 billion (or the
equivalent thereof), this U.S. $1 billion figure is not a fundamental
investment policy or restriction of the International Fund. For
calculation purposes with respect to the U.S. $1 billion figure, the
assets of a bank will be deemed to include the assets of its U.S. and non-
U.S. branches.

DERIVATIVE CONTRACTS (All Funds except otherwise noted)

Writing Covered Call Options These Funds may write (sell) covered call
options for hedging purposes. Covered call options will generally be
written on securities and currencies which, in the opinion of the Manager,
are not expected to make any major price moves in the near future but
which, over the long term, are deemed to be attractive investments for the
Fund.

A call option gives the holder (buyer) the right to purchase a security or
currency at a specified price (the exercise price) at any time until a
certain date (the expiration date). So long as the obligation of the
writer of a call option continues, he may be assigned an exercise notice
by the broker-dealer through whom such option was sold, requiring him to
deliver the underlying security or currency against payment of the
exercise price. This obligation terminates upon the expiration of the call
option, or such earlier time at which the writer effects a closing
purchase transaction by purchasing an option identical to that previously
sold. The Manager and the Company believe that writing covered call
options is less risky than writing uncovered or "naked" options, which the
Funds will not do.

Portfolio securities or currencies on which call options may be written
will be purchased solely on the basis of investment considerations
consistent with each Fund's investment objective. When writing a covered
call option, the Fund, in return for the premium, gives up the opportunity
for profit from a price increase in the underlying security or currency
above the exercise price and retains the risk of loss should the price of
the security or currency decline. Unlike one who owns securities or
currencies not subject to an option, the Fund has no control over when it
may be required to sell the underlying securities or currencies, since the
option may be exercised at any time prior to the option's expiration. If
a call option which the Fund has written expires, the Fund will realize a
gain in the amount of the premium; however, such gain may be offset by a
decline in the market value of the underlying security or currency during
the option period. If the call option is exercised, the Fund will realize
a gain or loss from the sale of the underlying security or currency. The
security or currency covering the call option will be maintained in a
segregated account of the Fund's custodian.
The premium the Fund receives for writing a call option is deemed to
constitute the market value of an option. The premium the Fund will
receive from writing a call option will reflect, among other things, the
current market price of the underlying security or currency, the
relationship of the exercise price to such market price, the implied price
volatility of the underlying security or currency, and the length of the
option period. In determining whether a particular call option should be
written on a particular security or currency, the Manager will consider
the reasonableness of the anticipated premium and the likelihood that a
liquid secondary market will exist for those options. The premium
received by the Fund for writing covered call options will be recorded as
a liability in the Fund's statement of assets and liabilities. This
liability will be adjusted daily to the option's current market value,
which will be calculated as described in "Determination of Net Asset
Value." The liability will be extinguished upon expiration of the option
or delivery of the underlying security or currency upon the exercise of
the option. The liability with respect to a listed option will also be
extinguished upon the purchase of an identical option in a closing
transaction.

Closing transactions will be effected in order to realize a profit or to
limit losses on an outstanding call option, to prevent an underlying
security or currency from being called, or to permit the sale of the
underlying security or currency. Furthermore, effecting a closing
transaction will permit the Fund to write another call option on the
underlying security or currency with either a different exercise price,
expiration date or both. If the Fund desires to sell a particular
security or currency from its portfolio on which it has written a call
option or purchases a put option, it will seek to effect a closing
transaction prior to, or concurrently with, the sale of the security or
currency. There is no assurance that the Fund will be able to effect such
closing transactions at a favorable price. If the Fund cannot enter into
such a transaction, it may be required to hold a security or currency that
it might otherwise have sold, in which case it would continue to be at
market risk with respect to the security or currency.

Transaction costs relating to options activity are normally higher than
those applicable to purchases and sales of portfolio securities.

The exercise price of the options may be below, equal to or above the
current market values of the underlying securities or currencies at the
time the options are written. From time to time, a Fund may purchase an
underlying security or currency for delivery in accordance with the
exercise of an option, rather than delivering such security or currency
from its portfolio. In such cases, additional costs will be incurred. A
Fund will realize a profit or loss from a closing purchase transaction if
the cost of the transaction is less or more, respectively, than the
premium received from the writing of the option. Because increases in the
market price of a call option will generally reflect increases in the
market price of the underlying security or currency, any loss resulting
from the repurchase of a call option is likely to be offset in whole or in
part by appreciation of the underlying security or currency owned by the
Fund.

Purchasing Put Options These Funds may purchase put options. As the
holder of a put option, the Fund has the right to sell the underlying
security or currency at the exercise price at any time during the option
period. The Fund may enter into closing sale transactions with respect to
such options, exercise them or permit them to expire.

Each Fund may purchase a put option on an underlying security or currency
(a "protective put") owned by the Fund as a hedging technique in order to
protect against an anticipated decline in the value of the security or
currency. Such hedge protection is provided only during the life of the
put option when the Fund, as the holder of the put option, is able to sell
the underlying security or currency at the put exercise price regardless
of any decline in the underlying security's market price or currency's
exchange value. For example, a put option may be purchased in order to
protect unrealized appreciation of a security or currency when the Manager
deems it desirable to continue to hold the security or currency because of
tax considerations. The premium paid for the put option and any
transaction costs may reduce any capital gain or, in the case of currency,
ordinary income otherwise available for distribution when the security or
currency is eventually sold.

Each Fund may also purchase put options at a time when the Fund does not
own the underlying security or currency. By purchasing put options on a
security or currency it does not own, the Fund seeks to benefit from a
decline in the market price of the underlying security or currency. If
the put option is not sold when it has remaining value, and if the market
price of the underlying security or currency remains equal to or greater
than the exercise price during the life of the put option, the Fund will
lose its entire investment in the put option. In order for the purchase of
a put option to be profitable, the market price of the underlying security
or currency must decline sufficiently below the exercise price to cover
the premium and transaction costs, unless the put option is sold in a
closing sale transaction.

The premium paid by a Fund when purchasing a put option will be recorded
as an asset in the Fund's statement of assets and liabilities. This asset
will be adjusted daily to the option's current market value, as calculated
by the Fund. The asset will be extinguished upon expiration of the option
or the delivery of the underlying security or currency upon the exercise
of the option. The asset with respect to a listed option will also be
extinguished upon the writing of an identical option in a closing
transaction.

Purchasing Call Options Each Fund may purchase call options. As the
holder of a call option, a Fund has the right to purchase the underlying
security or currency at the exercise price at any time during the option
period. The Fund may enter into a closing sale transactions with respect
to such options, exercise them or permit them to expire. Call options may
be purchased by the Fund for the purpose of acquiring the underlying
security or currency for its portfolio. Utilized in this fashion, the
purchase of call options enables the Fund to acquire the security or
currency at the exercise price of the call option plus the premium paid.
At times the net cost of acquiring the security or currency in this
manner may be less than the cost of acquiring the security or currency
directly. This technique may also be useful to the Fund in purchasing a
large block of securities that would be more difficult to acquire by
direct market purchases. So long as it holds such a call option rather
than the underlying security or currency itself, the Fund is partially
protected from any unexpected decline in the market price of the
underlying security or currency and in such event could allow the call
option to expire, incurring a loss only to the extent of the premium paid
for the option.

Each Fund may also purchase call options on underlying securities or
currencies it owns in order to protect unrealized gains on call options
previously written by it. A call option would be purchased for this
purpose where tax considerations make it inadvisable to realize such gains
through a closing purchase transaction. Call options may also be
purchased at times to avoid realizing losses that would result in a
reduction of the Fund's current return.
Options on Stock Indexes Options on stock indices are similar to
options on stock, but the delivery requirements are different. Instead of
giving the right to take or make delivery of stock at a specified price,
an option on a stock index gives the holder the right to receive an amount
of cash upon exercise of the option. Receipt of this cash amount will
depend upon the closing level of the stock index upon which the option is
based being greater than (in the case of a call) or less than (in the case
of a put) the exercise price of the option. The amount of cash received
will be the difference between the closing price of the index and the
exercise price of the option, multiplied by a specified dollar multiple.
The writer of the option is obligated, in return for the premium
received, to make delivery of this amount. Some stock index options are
based on a broad market index such as the Standard & Poor's 500 or the New
York Stock Exchange Composite Index, or a narrower index such as the
Standard & Poor's 100. Indexes are also based on an industry or market
segment such as the AMEX Oil and Gas Index or the Computer and Business
Equipment Index. Options are currently traded on The Chicago Board
Options Exchange, the New York Stock Exchange, the American Stock Exchange
and other exchanges. Gain or loss to a Fund on transactions in stock
index options will depend on price movements in the stock market generally
(or in a particular industry or segment of the market) rather than price
movements of individual securities. As with stock options, the Fund may
offset its position in stock index options prior to expiration by entering
into a closing transaction on an Exchange, or it may let the option expire
unexercised.

Foreign Currency Options ( International Fund) The Fund may purchase put
and call options on foreign currencies to reduce the risk of currency
exchange fluctuation. Premiums paid for such put and call options will be
limited to no more than 5% of the Fund's net assets at any given time.
Options on foreign currencies operate similarly to options on securities,
and are traded primarily in the over-the-counter market, although options
on foreign currencies are traded on United States and foreign exchanges.
Exchange-traded options are expected to be purchased by the Fund from
time to time and over-the-counter options may also be purchased, but only
when the manager believes that a liquid secondary market exists for such
options, although there can be no assurance that a liquid secondary market
will exist for a particular option at any specific time. Options on
foreign currencies are affected by all those factors which influence
foreign exchange rates and investment generally.

The value of a foreign currency option is dependent upon the value of the
underlying foreign currency relative to the U.S. dollar. As a result, the
price of the option position may vary with changes in the value of either
or both currencies and has no relationship to the investment merits of a
foreign security. Because foreign currency transactions occurring in the
interbank market (conducted directly between currency traders, usually
large commercial banks, and their customers) involve substantially larger
amounts than those that may be involved in the use of foreign currency
options, investors may be disadvantaged by having to deal in an odd lot
market (generally consisting of transactions of less than $1 million) for
the underlying foreign currencies at prices that are less favorable than
for round lots.

There is no systematic reporting of last sale information for foreign
currencies and there is no regulatory requirement that quotations
available through dealers or other market sources be firm or revised on a
timely basis. Quotation information available is generally representative
of very large transactions in the interbank market and thus may not
reflect relatively smaller transactions (i.e., less than $1 million) where
rates may be less favorable. The interbank market in foreign currencies
is a global, around-the-clock market. To the extent that the U.S. options
markets are closed while the markets for the underlying currencies remain
open, significant price and rate movements may take place in the
underlying markets that cannot be reflected in the options markets.

Futures Contracts Each Fund may enter into interest rate or currency
Futures Contracts ("Futures" or "Futures Contracts") as a hedge against
changes in prevailing levels of interest rates or currency exchange rates
in order to establish more definitely the effective return on securities
or currencies held or committed to be acquired by the Fund. A Fund's
hedging may include holding Futures as an offset against anticipated
changes in interest or currency exchange rates. A Fund may also enter
into Futures Contracts based on financial indices including any index of
U.S. Government securities, foreign government securities or corporate
debt securities.

A Futures Contract provides for the future sale by one party and purchase
by another party of a specified amount of a specific financial instrument
or currency for a specified price at a designated date, time and place.
The purchaser of a Futures Contract on an index agrees to take or make
delivery of an amount of cash equal to the difference between a specified
dollar multiple of the value of the index on the expiration date of the
contract ("current contract value") and the price at which the contract
was originally struck. No physical delivery of the debt securities
underlying the index is made. Brokerage fees are incurred when a Futures
Contract is bought or sold, and margin deposits must be maintained at all
times that the Futures Contract is outstanding.

Although techniques other than sales and purchases of Futures Contracts
could be used to reduce the Fund's exposure to interest rate and currency
exchange rate fluctuations, the Fund may be able to hedge its exposure
more effectively and at a lower cost through using Futures Contracts.
Although Futures Contracts typically require future delivery of and
payment for financial instruments or currencies, Futures Contracts are
usually closed out before the delivery date. Closing out an open Futures
Contract sale or purchase is effected by entering into an offsetting
Futures Contract purchase or sale, respectively, for the same aggregate
amount of the identical financial instrument or currency and the same
delivery date. If the offsetting purchase price is less than the original
sale price, the Fund realizes a gain; if it is more, the Fund realizes a
loss. Conversely, if the offsetting sale price is more than the original
purchase price, the Fund realizes a gain; if it is less, the Fund realizes
a loss. The transaction costs must also be included in these
calculations. There can be no assurance, however, that the Fund will be
able to enter into an offsetting transaction with respect to a particular
Futures Contract at a particular time. If the Fund is not able to enter
into an offsetting transaction, the Fund will continue to be required to
maintain the margin deposits of the underlying financial instrument or
currency on the relevant delivery date. The Company intends to enter into
Futures transactions only on exchanges or boards of trade where there
appears to be a liquid secondary market. However, there can be no
assurance that such a market will exist for a particular contract at a
particular time.

As an example of an offsetting transaction, the contractual obligations
arising from the sale of one Futures Contract of September Treasury Bills
on an exchange may be fulfilled at any time before delivery under the
Futures Contract is required (i.e., on a specific date in September, the
"delivery month") by the purchase of another Futures Contract of September
Treasury Bills on the same exchange. In such instance the difference
between the price at which the Futures Contract was sold and the price
paid for the offsetting purchase, after allowance for transaction costs,
represents the profit or loss to the Fund.

Persons who trade in Futures Contracts may be broadly classified as
"hedgers" and "speculators." Hedgers, whose business activity involves
investment or other commitment in securities or other obligations, use the
Futures markets to offset unfavorable changes in value that may occur
because of fluctuations in the value of the securities and obligations
held or committed to be acquired by them or fluctuations in the value of
the currency in which the securities or obligations are denominated.
Debtors and other obligors may also hedge the interest cost of their
obligations. The speculator, like the hedger, generally expects neither
to deliver nor to receive the financial instrument underlying the Futures
Contract, but, unlike the hedger, hopes to profit from fluctuations in
prevailing interest rates or currency exchange rates.
Each Fund's Futures transactions normally will be entered into for
traditional hedging purposes; that is, Futures Contracts will be sold to
protect against a decline in the price of securities or currencies the
Fund owns, or Futures Contracts will be purchased to protect a Fund
against an increase in the price of securities or currencies it has
committed to purchase or expects to purchase. The International Fund may,
however, enter into Futures transactions for non-hedging purposes, subject
to applicable law.

"Margin" with respect to Futures Contracts is the amount of Funds that
must be deposited by the Fund with a broker in order to initiate Futures
trading and to maintain the Fund's open positions in Futures Contracts. A
margin deposit made when the Futures Contract is entered into ("initial
margin") is intended to assure the Fund's performance of the Futures
Contract. The margin required for a particular Futures Contract is set by
the exchange on which the Futures Contract is traded, and may be
significantly modified from time to time by the exchange during the term
of the Futures Contract. Futures Contracts are customarily purchased and
sold on margins, which may be 5% or less of the value of the Futures
Contract being traded.

If the price of an open Futures Contract changes (by increase in the case
of a sale or by decrease in the case of a purchase) so that the loss on
the Futures Contract reaches a point at which the margin on deposit does
not satisfy margin requirements, the broker will require an increase in
the margin deposit ("variation margin"). If, however, the value of a
position increases because of favorable price changes in the Futures
Contract so that the margin deposit exceeds the required margin, it is
anticipated that the broker will pay the excess to the Fund. In computing
daily net asset values, the Fund will mark to market the current value of
its open Futures Contracts. Each Fund expects to earn interest income on
its margin deposits.

Options on Futures Contracts Options on Futures Contracts are similar to
options on securities or currencies except that options on Futures
Contracts give the purchaser the right, in return for the premium paid, to
assume a position in a Futures Contract (a long position if the option is
a call and a short position if the option is a put), rather than to
purchase or sell the Futures Contract, at a specified exercise price at
any time during the period of the option. Upon exercise of the option,
the delivery of the Futures position by the writer of the option to the
holder of the option will be accompanied by delivery of the accumulated
balance in the writer's Futures margin account which represents the amount
by which the market price of the Futures Contract, at exercise, exceeds
(in the case of a call) or is less than (in the case of a put) the
exercise price of the option on the Futures Contract. If an option is
exercised on the last trading day prior to the expiration date of the
option, the settlement will be made entirely in cash equal to the
difference between the exercise price of the option and the closing level
of the securities or currencies upon which the Futures Contracts are based
on the expiration date. Purchasers of options who fail to exercise their
options prior to the exercise date suffer a loss of the premium paid.

As an alternative to purchasing call and put options on Futures, each Fund
may purchase call and put options on the underlying securities or
currencies themselves (see "Purchasing Put Options" and "Purchasing Call
Options" above). Such options would be used in a manner identical to the
use of options on Futures Contracts.

To reduce or eliminate the leverage then employed by the Fund or to reduce
or eliminate the hedge position then held by the Fund, the Fund may seek
to close out an option position by selling an option covering the same
securities or currency and having the same exercise price and expiration
date. The ability to establish and close out positions on options on
Futures Contracts is subject to the existence of a liquid market. It is
not certain that this market will exist at any specific time.

In order to assure that the Funds will not be deemed to be "commodity
pools" for purposes of the Commodity Exchange Act, regulations of the
Commodity Futures Trading Commission ("CFTC") require that each Fund enter
into transactions in Futures Contracts and options on Futures Contracts
only (i) for bona fide hedging purposes (as defined in CFTC regulations),
or (ii) for non-hedging purposes, provided that the aggregate initial
margin and premiums on such non-hedging positions does not exceed 5% of
the liquidation value of the Fund's assets.

Forward Currency Contracts, Options on Currency and Currency Swaps
(International Fund) A forward currency contract is an obligation to
purchase or sell a currency against another currency at a future date and
price as agreed upon by the parties. The Fund may either accept or make
delivery of the currency at the maturity of the forward contract or, prior
to maturity, enter into a closing transaction involving the purchase or
sale of an offsetting contract. The International Fund engages in forward
currency transactions in anticipation of, or to protect itself against,
fluctuations in exchange rates. The Fund might sell a particular foreign
currency forward, for example, when it holds bonds denominated in that
currency but anticipates, and seeks to be protected against, decline in
the currency against the U.S. dollar. Similarly, the Fund might sell the
U.S. dollar forward when it holds bonds denominated in U.S. dollars but
anticipates, and seeks to be protected against, a decline in the U.S.
dollar relative to other currencies. Further, the Fund might purchase a
currency forward to "lock in" the price of securities denominated in that
currency which it anticipates purchasing.

The matching of the increase in value of a forward contract and the
decline in the U.S. dollar equivalent value of the foreign currency
denominated asset that is the subject of the hedge generally will not be
precise. In addition, the Fund may not always be able to enter into
foreign currency forward contracts at attractive prices and this will
limit the Fund's ability to use such contract to hedge or cross-hedge its
assets. Also, with regard to the Fund's use of cross-hedges, there can be
no assurance that historical correlations between the movement of certain
foreign currencies relative to the U.S. dollar will continue. Thus, at
any time poor correlation may exist between movements in the exchange
rates of the foreign currencies underlying the Fund's cross-hedges and the
movements in the exchange rates of the foreign currencies in which the
Fund's assets that are the subject of such cross-hedges are denominated.

Forward contracts are traded in an interbank market conducted directly
between currency traders (usually large commercial banks) and their
customers. A forward contract generally has no deposit requirement and is
consummated without payment of any commission. The International Fund,
however, may enter into forward contracts with deposit requirements or
commissions.

A put option gives the Fund, as purchaser, the right (but not the
obligation) to sell a specified amount of currency at the exercise price
until the expiration of the option. A call option gives the Fund, as
purchaser, the right (but not the obligation) to purchase a specified
amount of currency at the exercise price until its expiration. A Fund
might purchase a currency put option, for example, to protect itself
during the contract period against a decline in the value of a currency in
which it holds or anticipates holding securities. If the currency's value
should decline, the loss in currency value should be offset, in whole or
in part, by an increase in the value of the put. If the value of the
currency instead should rise, any gain to the Fund would be reduced by the
premium it had paid for the put option. A currency call option might be
purchased, for example, in anticipation of, or to protect against, a rise
in the value of a currency in which the Fund anticipates purchasing
securities.

The International Fund's ability to establish and close out positions in
foreign currency options is subject to the existence of a liquid market.
There can be no assurance that a liquid market will exist for a
particular option at any specific time. In addition, options on foreign
currencies are affected by all of those factors that influence foreign
exchange rates and investments generally.

A position in an exchange-listed option may be closed out only on an
exchange that provides a secondary market for identical options. Exchange
markets for options on foreign currencies exist but are relatively new,
and the ability to establish and close out positions on the exchanges is
subject to maintenance of a liquid secondary market. Closing transactions
may be effected with respect to options traded in the over-the-counter
("OTC") markets (currently the primary markets for options on foreign
currencies) only by negotiating directly with the other party to the
option contract or in a secondary market for the option if such market
exists. Although the Fund intends to purchase only those options for
which there appears to be an active secondary market, there is no
assurance that a liquid secondary market will exist for any particular
option at any specific time. In such event, it may not be possible to
effect closing transactions with respect to certain options, with the
result that the Fund would have to exercise those options which it has
purchased in order to realize any profit. The staff of the Securities and
Exchange Commission ("SEC") has taken the position that, in general,
purchased OTC options and the underlying securities used to cover written
OTC options are illiquid securities. However, the Fund may treat as liquid
the underlying securities used to cover written OTC options, provided it
has arrangements with certain qualified dealers who agree that the Fund
may repurchase any option it writes for a maximum price to be calculated
by a predetermined formula. In these cases, the OTC option itself would
only be considered illiquid to the extent that the maximum repurchase
price under the formula exceeds the intrinsic value of the option.

The Fund may also enter into currency swaps. A currency swap is an
arrangement whereby each party exchanges one currency for another on a
particular date and agrees to reverse the exchange on a later date at a
specific exchange rate. Forward foreign currency contracts and currency
swaps are established in the interbank market conducted directly between
currency traders (usually large commercial banks or other financial
institutions) on behalf of their customers.

Interest Rate Swaps, Caps and Floors (International Fund) Among the
hedging transactions into which the International Fund may enter are
interest rate swaps and the purchase or sale of interest rate caps and
floors. The Fund expects to enter into these transactions primarily to
preserve a return or spread on a particular investment or portion of its
portfolio or to protect against any increase in the price of securities
the Fund anticipates purchasing at a later date. The Fund intends to use
these transactions as a hedge and not as a speculative investment. The
Fund will not sell interest rate caps or floors that it does not own.
Interest rate swaps involve the exchange by The Fund with another party of
its respective commitments to pay or receive interest, e.g., an exchange
of floating rate payments for fixed rate payments. The purchase of an
interest rate cap entitles the purchaser, to the extent that a specified
index exceeds a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling such
interest rate cap. The purchase of an interest rate floor entitles the
purchaser, to the extent that a specified index falls below a
predetermined interest rate, to receive payments of interest on a notional
principal amount from the party selling such interest rate floor.

The Fund may enter into interest rate swaps, caps and floors on either an
asset-based or liability-based basis, depending on whether it is hedging
its assets or its liabilities, and will usually enter into interest rate
swaps on a net basis, i.e., the two payment streams are netted, with the
Fund receiving or paying, as the case may be, only the net amount of the
two payments. Inasmuch as these hedging transactions are entered into for
good faith hedging purposes, the Manager and the Fund believes such
obligations do not constitute senior securities and, accordingly will not
treat them as being subject to their borrowing restrictions. The net
amount of the excess, if any, of the Fund's obligations over its
entitlements with respect to each interest rate swap will be accrued on a
daily basis and an amount of cash or liquid securities having an aggregate
net asset value at least equal to the accrued excess will be maintained in
a segregated account by a custodian that satisfies the requirements of the
1940 Act. The Fund will not enter into any interest rate swap, cap or
floor transaction unless the unsecured senior debt or the claims-paying
ability of the other party thereto is rated in the highest rating category
of at least one nationally recognized rating organization at the time of
entering into such transaction. If there is a default by the other party
to such a transaction, the Fund will have contractual remedies pursuant to
the agreements related to the transaction. The swap market has grown
substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agents utilizing swap
documentation. As a result, the swap market has become relatively liquid.
Caps and floors are more recent innovations for which standardized
documentation has not yet been developed and, accordingly, they are less
liquid than swaps.

New options and Futures Contracts and various combinations thereof
continue to be developed and the Fund may invest in any such options and
contracts as may be developed to the extent consistent with its investment
objectives and regulatory requirements applicable to investment companies.

Use of Segregated and Other Special Accounts Use of many hedging and other
strategic transactions including currency and market index transactions by
the Fund will require, among other things, that the Fund segregate cash,
liquid securities or other assets with its Custodian, or a designated sub-
custodian, to the extent the Fund's obligations are not otherwise
"covered" through ownership of the underlying security, financial
instrument or currency. In general, either the full amount of any
obligation by the Fund to pay or deliver securities or assets must be
covered at all times by the securities, instruments or currency required
to be delivered, or, subject to any regulatory restrictions, appropriate
securities as required by the 1940 Act at least equal to the current
amount of the obligation must be segregated with the custodian or sub-
custodian. The segregated assets cannot be sold or transferred unless
equivalent assets are substituted in their place or it is no longer
necessary to segregate them. A call option on securities written by the
Fund, for example, will require the Fund to hold the securities subject to
the call (or securities convertible into the needed securities without
additional consideration) or to segregate liquid securities sufficient to
purchase and deliver the securities if the call is exercised. A call
option by the Fund on an index will require the Fund to own portfolio
securities that correlate with the index or to segregate liquid securities
equal to the excess of the index value over the exercise price on a
current basis. A put option on securities written by the Fund will
require the Fund to segregate liquid securities equal to the exercise
price. Except when the Fund enters into a forward contract in connection
with the purchase or sale of a security denominated in a foreign currency
or for other non-speculative purposes, which requires no segregation, a
currency contract that obligates the Fund to buy or sell a foreign
currency will generally require the Fund to hold an amount of that
currency, liquid securities denominated in that currency equal to the
Fund's obligations or to segregate liquid securities equal to the amount
of the Fund's obligations.

OTC options entered into by the Fund, including those on securities,
currency, financial instruments or indices, and OCC-issued and exchange-
listed index options will generally provide for cash settlement, although
the Fund will not be required to do so. As a result, when the Fund sells
these instruments it will segregate an amount of assets equal to its
obligations under the options. OCC-issued and exchange-listed options
sold by the Fund other than those described above generally settle with
physical delivery, and the Fund will segregate an amount of assets equal
to the full value of the option. OTC options settling with physical
delivery or with an election of either physical delivery or cash
settlement will be treated the same as other options settling with
physical delivery.

In the case of a futures contract or an option on a futures contract, the
Fund must deposit initial margin and, in some instances, daily variation
margin in addition to segregating assets sufficient to meet its
obligations to purchase or provide securities or currencies, or to pay the
amount owed at the expiration of an index-based futures contract. These
assets may consist of cash, cash equivalents, liquid securities or other
acceptable assets. The Fund will accrue the net amount of the excess, if
any, of its obligations relating to swaps over its entitlements with
respect to each swap on a daily basis and will segregate with its
custodian, or designated sub-custodian, an amount of cash or liquid
securities having an aggregate value equal to at least accrued excess.
Caps, floors and collars require segregation of assets with a value equal
to the Fund's net obligation, if any.

Hedging and other strategic transactions may be covered by means other
than those described above when consistent with applicable regulatory
policies. The Fund may also enter into offsetting transactions so that
its combined position, coupled with any segregated assets, equals its net
outstanding obligation in related options and hedging and other strategic
transactions. The Fund could purchase a put option, for example, if the
strike price of that option is the same or higher than the strike price of
a put option sold by the Fund. Moreover, instead of segregating assets if
it holds a futures contract or forward contract, the Fund could purchase
a put option on the same futures contract or forward contract with a
strike price as high or higher than the price of the contract held. Other
hedging and other strategic transactions may also be offset in
combinations. If the offsetting transaction terminates at the time of or
after the primary transaction, no segregation is required, but if it
terminates prior to that time, assets equal to any remaining obligation
would need to be segregated.

OTHER PRACTICES

Securities of Foreign Issuers (All Funds) The Large Cap and Growth and
Income Funds may invest up to 20% of their assets in securities of foreign
issuers. Investments in securities of foreign entities and securities
denominated in foreign currencies involve risks not typically involved in
domestic investment, including fluctuations in foreign exchange rates,
future foreign political and economic developments, and the possible
imposition of exchange controls or other foreign or United States
governmental laws or restrictions applicable to such investments. Since
each Fund may invest in securities denominated or quoted in currencies
other than the U.S. dollar, changes in foreign currency exchange rates may
affect the value of investments in the portfolio and the accrued income
and unrealized appreciation or depreciation of investments. Changes in
foreign currency rates relative to the U.S. dollar will affect the U.S.
dollar value of the Fund's assets denominated in that currency and the
Fund's yield on such assets.

Each Fund may also purchase foreign securities in the form of American
Depositary Receipts ("ADRs"). ADRs are publicly traded on exchanges or
over-the-counter in the United States and are issued through "sponsored"
or "unsponsored" arrangements. In a sponsored ADR arrangement, the foreign
issuer assumes the obligation to pay some or all of the depositary's
transaction fees, whereas under an unsponsored arrangement, the foreign
issuer assumes no obligation and the depositary's transaction fees are
paid by the ADR holders. In addition, less information is available in the
United States about an unsponsored ADR than about a sponsored ADR, and the
financial information about a company may not be as reliable for an
unsponsored ADR as it is for a sponsored ADR. Each Fund may invest in ADRs
through both sponsored and unsponsored arrangements.

With respect to certain foreign countries, there is the possibility of
expropriation of assets, confiscatory taxation, political or social
instability or diplomatic developments which could affect investment in
those countries. There may be less publicly available information about a
foreign security than about a United States security, and foreign entities
may not be subject to accounting, auditing and financial reporting
standards and requirements comparable to those of United States entities.
In addition, certain foreign investments made by the Fund may be subject
to foreign withholding taxes, which would reduce the Fund's total return
on such investments and the amounts available for distributions by the
Fund to its shareholders. Foreign financial markets, while growing in
volume, have, for the most part, substantially less volume than United
States markets, and securities of many foreign companies are less liquid
and their prices more volatile than securities of comparable domestic
companies.

The foreign markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements
have been unable to keep pace with the volume of securities transactions
making it difficult to conduct such transactions. Delays in settlement
could result in temporary periods when assets of a Fund are not invested
and no return is earned thereon. The inability of each Fund to make
intended security purchases due to settlement problems could cause the
Fund to miss attractive investment opportunities. Inability to dispose of
portfolio securities due to settlement problems could result either in
losses to the Fund due to subsequent declines in value of the portfolio
security or, if the Fund has entered into a contract to sell the security,
could result in possible liability to the purchaser. Costs associated with
transactions in foreign securities, including custodial costs and foreign
brokerage commissions, are generally higher than with transactions in
United States securities. In addition, each Fund will incur cost in
connection with conversions between various currencies. There is generally
less government supervision and regulation of exchanges, financial
institutions and issuers in foreign countries than there are in the United
States. These risks may be intensified in the case of investments in
developing or emerging markets. In many developing markets, there is less
government supervision and regulation of business and industry practices,
stock exchanges, brokers and listed companies than in the United States.
The foreign securities markets of many of the countries in which a Fund
may invest may also be smaller, less liquid, and subject to greater price
volatility than those in the United States. Finally, in the event of a
default on any such foreign debt obligations, it may be more difficult for
a Fund to obtain or to enforce a judgment against the issuers of such
securities.

A developing country generally is considered to be a country that is in
the initial stages of its industrialization cycle. Investing in the equity
and fixed-income markets of developing countries involves exposure to
economic structures that are generally less diverse and mature, and to
political systems that can be expected to have less stability, than those
of developed countries. Historical experience indicates that the markets
of developing countries have been more volatile than the markets of the
more mature economics of developed countries; however, such markets often
have provided higher rates of return to investors.

One or more of the risks discussed above could affect adversely the
economy of a developing market or a Fund's investments in such a market.
In Eastern Europe, for example, upon the accession to power of Communist
regimes in the past, the governments of a number of Eastern European
countries expropriated a large amount of property. The claims of many
property owners against those governments were never finally settled.
There can be no assurance that any investments that the Fund might make in
such emerging markets would not be expropriated, nationalized or otherwise
confiscated at some time in the future. In such an event, the Fund could
lose its entire investment in the market involved. Moreover, changes in
the leadership or policies of such markets could halt the expansion or
reverse the liberalization of foreign investment policies now occurring in
certain of these markets and adversely affect existing investment
opportunities.

Illiquid and Restricted Securities (All Funds) The Funds may invest in
restricted securities. As used herein, restricted securities are those
that have been sold in the United States without registration under the
Securities Act of 1933 and are thus subject to restrictions on resale.
Excluded from the limitation, however, are any restricted securities which
are eligible for resale pursuant to Rule 144A under the Securities Act of
1933 and which have been determined to be liquid by the Trustee or by the
Manager pursuant to board-approved guidelines. The determination of
liquidity is based on the volume of reported trading in the institutional
secondary market for each security. This investment practice could have
the effect of increasing the level of illiquidity in each Fund to the
extent qualified institutional buyers become for a time uninterested in
purchasing these restricted securities. These difficulties and delays
could result in a Fund's inability to realize a favorable price upon
disposition of restricted securities, and in some cases might make
disposition of such securities at the time desired by the Fund impossible.
Since market quotations are not readily available for restricted
securities, such securities will be valued by a method that the Trustee
believe accurately reflects fair value.

Repurchase Agreements (All Funds) Each Fund may enter into repurchase
agreements with broker-dealers or domestic banks. A repurchase agreement
is a short-term investment in which the purchaser (i.e., the Fund)
acquires ownership of a debt security and the seller agrees to repurchase
the obligation at a future time and set price, usually not more than seven
days from the date of purchase, thereby determining the yield during the
purchaser's holding period. Repurchase agreements are collateralized by
the underlying debt securities and may be considered to be loans under the
1940 Act. The Fund will make payment for such securities only upon
physical delivery or evidence of book entry transfer to the account of a
custodian or bank acting as agent. The seller under a repurchase
agreement is required to maintain the value of the underlying securities
marked to market daily at not less than the repurchase price. The
underlying securities (normally securities of the U.S. Government, or its
agencies and instrumentalities), may have maturity dates exceeding one
year. The Fund does not bear the risk of a decline in value of the
underlying security unless the seller defaults under its repurchase
obligation. In the event of a bankruptcy or other default of a seller of
a repurchase agreement, the Fund could experience both delays in
liquidating the underlying securities and loss including: (a) possible
decline in the value of the underlying security during the period while
the Fund seeks to enforce its rights thereto, (b) possible lack of access
to income on the underlying security during this period, and (c) expenses
of enforcing its rights.

For the purpose of investing in repurchase agreements, the Manager may
aggregate the cash that certain Funds advised or subadvised by the Manager
or its affiliates would otherwise invest separately into a joint account.
The cash in the joint account is then invested in repurchase agreements
and the Funds that contributed to the joint account share pro rata in the
net revenue generated. The Manager believes that the joint account
produces efficiencies and economies of scale that may contribute to
reduced transaction costs, higher returns, higher quality investments and
greater diversity of investments for a Fund than would be available to a
Fund investing separately. The manner in which the joint account is
managed is subject to conditions set forth in an SEC exemptive order
authorizing this practice, which conditions are designed to ensure the
fair administration of the joint account and to protect the amounts in
that account.

Reverse Repurchase Agreements (International Fund) The Fund may enter into
reverse repurchase agreements with broker/dealers and other financial
institutions. Such agreements involve the sale of portfolio securities
with an agreement to repurchase the securities at an agreed-upon price,
date and interest payment and are considered to be borrowings by the Fund
and are subject to the borrowing limitations set forth under "Investment
Restrictions." Since the proceeds of reverse repurchase agreements are
invested, this would introduce the speculative factor known as "leverage."
The securities purchased with the funds obtained from the agreement and
securities collateralizing the agreement will have maturity dates no later
than the repayment date. Generally, the effect of such a transaction is
that the Fund can recover all or most of the cash invested in the
portfolio securities involved during the term of the reverse repurchase
agreement, while in many cases it will be able to keep some of the
interest income associated with those securities. Such transactions are
only advantageous if the Fund has an opportunity to earn a greater rate of
interest on the cash derived from the transaction than the interest cost
of obtaining that cash. Opportunities to realize earnings from the use of
the proceeds equal to or greater than the interest required to be paid may
not always be available, and the Fund intends to use the reverse
repurchase technique only when the Manager believes it will be
advantageous to the Fund. The use of reverse repurchase agreements may
exaggerate any interim increase or decrease in the value of the Fund's
assets. The Fund's custodian bank will maintain a separate account for
the Fund with securities having a value equal to or greater than such
commitments.

Short Sales Against the Box (All Funds) Each Fund may from time to time
make short sales of securities it owns or has the right to acquire through
conversion or exchange of other securities it owns. A short sale is
"against the box" to the extent that the Fund contemporaneously owns or
has the right to obtain at no added cost securities identical to those
sold short. In a short sale, the Fund does not immediately deliver the
securities sold and does not receive the proceeds from the sale. The Fund
is said to have a short position in the securities sold until it delivers
the securities sold, at which time it receives the proceeds of the sale.
The Fund may not make short sales or maintain a short position if to do so
would cause more than 25% of its total assets, taken at market value, to
be held as collateral for such sales.

To secure its obligation to deliver the securities sold short, the Fund
will deposit in escrow in a separate account with its custodian an equal
amount of the securities sold short or securities convertible into or
exchangeable for such securities. The Fund may close out a short position
by purchasing and delivering an equal amount of the securities sold short,
rather than by delivering securities already held by the Fund, because the
Fund may want to continue to receive interest and dividend payments on
securities in its portfolio that are convertible into the securities sold
short. However, the Fund will not purchase and deliver new securities to
satisfy its short order if such purchase and sale would cause the Fund to
derive more than 30% of its gross income from the sale of securities held
for less than three months.

Leverage (International Fund) The Fund may borrow from banks, on a
secured or unsecured basis, up to 25% of the value of its assets. If the
Fund borrows and uses the proceeds to make additional investments, income
and appreciation from such investments will improve its performance if
they exceed the associated borrowing costs but impair its performance if
they are less than such borrowing costs. This speculative factor is known
as "leverage." Leverage creates an opportunity for increased returns to
shareholders of the Fund but, at the same time, creates special risk
considerations. For example, leverage may exaggerate changes in the net
asset value of the Fund's shares and in the Fund's yield. Although the
principal or stated value of such borrowings will be fixed, the Fund's
assets may change in value during the time the borrowing is outstanding.
Leverage will create interest or dividend expenses for the Fund which can
exceed the income from the assets retained. To the extent the income or
other gain derived from securities purchased with borrowed Funds exceed
the interest or dividends the Fund will have to pay in respect thereof,
the Fund's net income or other gain will be greater than if leverage had
not been used. Conversely, if the income or other gain from the
incremental assets is not sufficient to cover the cost of leverage, the
net income or other gain of the Fund will be less than if leverage had not
been used. If the amount of income from the incremental securities is
insufficient to cover the cost of borrowing, securities might have to be
liquidated to obtain required Funds. Depending on market or other
conditions, such liquidations could be disadvantageous to the Fund. The
Fund is required to maintain continuous asset coverage of 300% with
respect to such borrowings, and to sell (within three days) sufficient
portfolio holdings to restore such coverage, if it should decline to less
than 300% due to market fluctuations or otherwise, even if disadvantageous
from an investment standpoint.

Lending Portfolio Securities (All Funds) Consistent with applicable
regulatory requirements each Fund has the ability to lend securities from
its portfolio to brokers, dealers and other financial organizations. A
Fund will not lend its portfolio securities to Salomon Smith Barney or its
affiliates unless it has applied for and received specific authority to do
so from the SEC. Loans of portfolio securities will be collateralized by
cash, letters of credit or U.S. government securities in an amount at
least equal to the current market value of the loaned securities. From
time to time, a Fund may return a part of the interest earned from the
investment of collateral received for securities loaned to the borrower
and/or a third party, which is unaffiliated with the Fund or with Salomon
Smith Barney, and which is acting as a "finder".

In lending its securities, a Fund can increase its income by continuing to
receive interest on the loaned securities as well as by either investing
the cash collateral in short-term instruments or obtaining yield in the
form of interest paid by the borrower when U.S. government securities are
used as collateral. Requirements of the SEC, which may be subject to
further modifications, currently provide that the following conditions
must be met whenever a Fund's portfolio securities are loaned: (a) the
Fund must receive at least 100% cash collateral or equivalent securities
from the borrower; (b) the borrower must increase such collateral whenever
the market value of the securities loaned rises above the level of such
collateral; (c) the Fund must be able to terminate the loan at any time;
(d) the Fund must receive reasonable interest on the loan, as well as an
amount equal to dividends, interest or other distributions on the loaned
securities, and any increase in market value; (e) the Fund may pay only
reasonable custodian fees in connection with the loan; and (f) voting
rights on the loaned securities may pass to the borrower; provided,
however, that if a material event adversely affecting the investment in
the loaned securities occurs, the Board of Directors must terminate the
loan and regain the right to vote the securities. The risks in lending
portfolio securities, as with other extensions of secured credit, consist
of possible delay in receiving additional collateral or in the recovery of
the securities or possible loss of rights in the collateral should the
borrower fail financially. Loans will be made to firms deemed by to be
of good standing and will not be made unless, in the judgment of, the
consideration to be earned from such loans would justify the risk.

RISK FACTORS

General Investors should realize that risk of loss is inherent in the
ownership of any securities and that each Fund's net asset value will
fluctuate, reflecting fluctuations in the market value of its portfolio
positions.

Fixed Income Securities Investments in fixed income securities may
subject the Funds to risks, including the following:

Interest Rate Risk. When interest rates decline, the market value of
fixed income securities tends to increase. Conversely, when interest rates
increase, the market value of fixed income securities tends to decline.
The volatility of a security's market value will differ depending upon
the security's duration, the issuer and the type of instrument.

Default Risk/Credit Risk. Investments in fixed income securities are
subject to the risk that the issuer of the security could default on its
obligations, causing a Fund to sustain losses on such investments. A
default could impact both interest and principal payments.

Call Risk and Extension Risk. Fixed income securities may be subject to
both call risk and extension risk. Call risk exists when the issuer may
exercise its right to pay principal on an obligation earlier than
scheduled, which would cause cash flows to be returned earlier than
expected. This typically results when interest rates have declined and a
Fund will suffer from having to reinvest in lower yielding securities.
Extension risk exists when the issuer may exercise its right to pay
principal on an obligation later than scheduled, which would cause cash
flows to be returned later than expected. This typically results when
interest rates have increased, and a Fund will suffer from the inability
to invest in higher yield securities.

Lower Rated and Below Investment Grade Fixed Income Securities Securities
which are rated BBB by S&P or Baa by Moody's are generally regarded as
having adequate capacity to pay interest and repay principal, but may have
some speculative characteristics. Securities rated below Baa by Moody's
or BBB by S&P may have speculative characteristics, including the
possibility of default or bankruptcy of the issuers of such securities,
market price volatility based upon interest rate sensitivity, questionable
creditworthiness and relative liquidity of the secondary trading market.
Because high yield bonds have been found to be more sensitive to adverse
economic changes or individual corporate developments and less sensitive
to interest rate changes than higher-rated investments, an economic
downturn could disrupt the market for high yield bonds and adversely
affect the value of outstanding bonds and the ability of issuers to repay
principal and interest. In addition, in a declining interest rate market,
issuers of high yield bonds may exercise redemption or call provisions,
which may force a Fund, to the extent it owns such securities, to replace
those securities with lower yielding securities. This could result in a
decreased return.

Subsequent to its purchase by a Fund, an issue of securities may cease to
be rated or its rating may be reduced below the minimum required for
purchase by the Fund. In addition, it is possible that Moody's, S&P and
other ratings agencies might not timely change their ratings of a
particular issue to reflect subsequent events.

Foreign Securities Investments in securities of foreign issuers involve
certain risks not ordinarily associated with investments in securities of
domestic issuers. Such risks include fluctuations in foreign exchange
rates, future political and economic developments, and the possible
imposition of exchange controls or other foreign governmental laws or
restrictions. Changes in foreign currency exchange rates will, to the
extent a Fund does not adequately hedge against such fluctuations, affect
the value of securities in its portfolio and the unrealized appreciation
or depreciation of investments so far as U.S. investors are concerned. In
addition, with respect to certain countries, there is the possibility of
expropriation of assets, confiscatory taxation, political or social
instability or diplomatic developments which could adversely affect
investments in those countries.

There may be less publicly available information about a foreign company
than about a U.S. company, and foreign companies may not be subject to
accounting, auditing, and financial reporting standards and requirements
comparable to or as uniform as those of U.S. companies. Foreign
securities markets, while growing in volume, have, for the most part,
substantially less volume than U.S. markets, and securities of many
foreign companies are less liquid and their price more volatile than
securities of comparable U.S. companies. Transaction costs on foreign
securities markets are generally higher than in the U.S. There is
generally less government supervision and regulation of exchanges, brokers
and issuers than there is in the U.S. A Fund might have greater difficulty
taking appropriate legal action in foreign courts. Dividend and interest
income from foreign securities will generally be subject to withholding
taxes by the country in which the issuer is located and may not be
recoverable by the Fund or the investors. Capital gains are also subject
to taxation in some foreign countries.

Currency Risks The U.S. dollar value of securities denominated in a
foreign currency will vary with changes in currency exchange rates, which
can be volatile. Accordingly, changes in the value of the currency in
which a Fund's investments are denominated relative to the U.S. dollar
will affect the Fund's net asset value. Exchange rates are generally
affected by the forces of supply and demand in the international currency
markets, the relative merits of investing in different countries and the
intervention or failure to intervene of U.S. or foreign governments and
central banks. However, currency exchange rates may fluctuate based on
factors intrinsic to a country's economy. Some emerging market countries
also may have managed currencies, which are not free floating against the
U.S. dollar. In addition, emerging markets are subject to the risk of
restrictions upon the free conversion of their currencies into other
currencies. Any devaluations relative to the U.S. dollar in the
currencies in which a Fund's securities are quoted would reduce the Fund's
net asset value per share.

Special Risks of Countries in the Asia Pacific Region Certain of the
risks associated with international investments are heightened for
investments in these countries. For example, some of the currencies of
these countries have experienced devaluations relative to the U.S. dollar,
and adjustments have been made periodically in certain of such currencies.
Certain countries, such as Indonesia, face serious exchange constraints.
Jurisdictional disputes also exist, for example, between South Korea and
North Korea. In addition, Hong Kong reverted to Chinese administration on
July 1, 1997. The long-term effects of this reversion are not known at
this time.

Securities of Developing/Emerging Markets Countries. A developing or
emerging markets country generally is considered to be a country that is
in the initial stages of its industrialization cycle. Investing in the
equity markets of developing countries involves exposure to economic
structures that are generally less diverse and mature, and to political
systems that can be expected to have less stability, than those of
developed countries. Historical experience indicates that the markets of
developing countries have been more volatile than the markets of the more
mature economies of developed countries; however, such markets often have
provided higher rates of return to investors.

One or more of the risks discussed above could affect adversely the
economy of a developing market or a Fund's investments in such a market.
In Eastern Europe, for example, upon the accession to power of Communist
regimes in the past, the governments of a number of Eastern European
countries expropriated a large amount of property. The claims of many
property owners against those of governments may remain unsettled. There
can be no assurance that any investments that a Fund might make in such
emerging markets would not be expropriated, nationalized or otherwise
confiscated at some time in the future. In such an event, the Fund could
lose its entire investment in the market involved. Moreover, changes in
the leadership or policies of such markets could halt the expansion or
reverse the liberalization of foreign investment policies now occurring in
certain of these markets and adversely affect existing investment
opportunities.

Many of a Fund's investments in the securities of emerging markets may be
unrated or rated below investment grade. Securities rated below investment
grade (and comparable unrated securities) are the equivalent of high
yield, high risk bonds, commonly known as "junk bonds." Such securities
are regarded as predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with the terms
of the obligations and involve major risk exposure to adverse business,
financial, economic, or political conditions.

Derivative Instruments In accordance with its investment policies, each
Fund may invest in certain derivative instruments which are securities or
contracts that provide for payments based on or "derived" from the
performance of an underlying asset, index or other economic benchmark.
Essentially, a derivative instrument is a financial arrangement or a
contract between two parties (and not a true security like a stock or a
bond). Transactions in derivative instruments can be, but are not
necessarily, riskier than investments in conventional stocks, bonds and
money market instruments. A derivative instrument is more accurately
viewed as a way of reallocating risk among different parties or
substituting one type of risk for another. Every investment by a Fund,
including an investment in conventional securities, reflects an implicit
prediction about future changes in the value of that investment. Every
Fund investment also involves a risk that the portfolio Manager's
expectations will be wrong. Transactions in derivative instruments often
enable a Fund to take investment positions that more precisely reflect the
portfolio Manager's expectations concerning the future performance of the
various investments available to the Fund. Derivative instruments can be
a legitimate and often cost-effective method of accomplishing the same
investment goals as could be achieved through other investment in
conventional securities.

Derivative contracts include options, Futures Contracts, forward
contracts, forward commitment and when-issued securities transactions,
forward foreign currency exchange contracts and interest rate, mortgage
and currency swaps. The following are the principal risks associated with
derivative instruments.

Leverage and associated price volatility: Leverage causes increased
volatility in the price and magnifies the impact of adverse market
changes, but this risk may be consistent with the investment objective of
even a conservative Fund in order to achieve an average portfolio
volatility that is within the expected range for that type of Fund.

Credit risk: The issuer of the instrument may default on its obligation
to pay interest and principal.

Liquidity and valuation risk: Many derivative instruments are traded in
institutional markets rather than on an exchange. Nevertheless, many
derivative instruments are actively traded and can be priced with as much
accuracy as conventional securities. Derivative instruments that are
custom designed to meet the specialized investment needs of a relatively
narrow group of institutional investors such as the Funds are not readily
marketable and are subject to a Fund's restrictions on illiquid
investments.
Correlation risk: There may be imperfect correlation between the price of
the derivative and the underlying asset. For example, there may be price
disparities between the trading markets for the derivative contract and
the underlying asset.

Each derivative instrument purchased for a Fund's portfolio is reviewed
and analyzed by the Fund's portfolio Manager to assess the risk and reward
of such instrument in relation the Fund's portfolio investment strategy.
The decision to invest in derivative instruments or conventional
securities is made by measuring the respective instrument's ability to
provide value to the Fund and its shareholders.

Special Risks of Using Futures Contracts and Options on Futures Contracts
The prices of Futures Contracts are volatile and are influenced by, among
other things, actual and anticipated changes in interest rates, which in
turn are affected by fiscal and monetary policies and national and
international political and economic events.

At best, the correlation between changes in prices of Futures Contracts
and of the securities or currencies being hedged can be only approximate.
The degree of imperfection of correlation depends upon circumstances such
as: variations in speculative market demand for Futures and for debt
securities or currencies, including technical influences in Futures
trading; and differences between the financial instruments being hedged
and the instruments underlying the standard Futures Contracts available
for trading, with respect to interest rate levels, maturities, and
creditworthiness of issuers. A decision of whether, when, and how to
hedge involves skill and judgment, and even a well-conceived hedge may be
unsuccessful to some degree because of unexpected market behavior or
interest rate trends.

Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial
loss or gain, to the investor. For example, if at the time of purchase,
10% of the value of the Futures Contract is deposited as margin, a
subsequent 10% decrease in the value of the Futures Contract would result
in a total loss of the margin deposit, before any deduction for the
transaction costs, if the account were then closed out. A 15% decrease
would result in a loss equal to 150% of the original margin deposit, if
the Futures Contract were closed out. Thus, a purchase or sale of a
Futures Contract may result in losses in excess of the amount invested in
the Futures Contract. A Fund, however, would presumably have sustained
comparable losses if, instead of the Futures Contract, it had invested in
the underlying financial instrument and sold it after the decline. Where
a Fund enters into Futures transactions for non-hedging purposes, it will
be subject to greater risks and could sustain losses which are not offset
by gains on other Fund assets.

In order to be certain that each Fund has sufficient assets to satisfy its
obligations under a Futures Contract, the Fund segregates and commits to
back the Futures Contract an amount of cash and liquid securities equal in
value to the current value of the underlying instrument less the margin
deposit.

Most U.S. Futures exchanges limit the amount of fluctuation permitted in
Futures Contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a Futures Contract may
vary either up or down from the previous day's settlement price at the end
of a trading session. Once the daily limit has been reached in a
particular type of Futures Contract, no trades may be made on that day at
a price beyond that limit. The daily limit governs only price movement
during a particular trading day and therefore does not limit potential
losses, because the limit may prevent the liquidation of unfavorable
positions. Futures Contract prices have occasionally moved to the daily
limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of Futures positions and subjecting
some Futures traders to substantial losses.
As with options on debt securities, the holder of an option may terminate
his position by selling an option of the same series. There is no
guarantee that such closing transactions can be effected. The Fund will
be required to deposit initial margin and maintenance margin with respect
to put and call options on Futures Contracts described above, and, in
addition, net option premiums received will be included as initial margin
deposits.

In addition to the risks which apply to all option transactions, there are
several special risks relating to options on Futures Contracts. The
ability to establish and close out positions on such options will be
subject to the development and maintenance of a liquid secondary market.
It is not certain that this market will develop. The Fund will not
purchase options on Futures Contracts on any exchange unless and until, in
the Manager's opinion, the market for such options had developed
sufficiently that the risks in connection with options on Futures
Contracts are not greater than the risks in connection with Futures
Contracts. Compared to the use of Futures Contracts, the purchase of
options on Futures Contracts involves less potential risk to the Fund
because the maximum amount of risk is the premium paid for the options
(plus transaction costs). Writing an option on a Futures Contract
involves risks similar to those arising in the sale of Futures Contracts,
as described above.

Economic and Monetary Union (EMU). EMU began on January 1, 1999 when 11
European countries adopted a single currency -- the Euro. EMU may create
new economic opportunities for investors, such as lower interest rates,
easier cross-border mergers, acquisitions and similar restructurings, more
efficient distribution and product packaging and greater competition.
Budgetary decisions remain in the hands of each participating country, but
are subject to each country's commitment to avoid "excessive deficits" and
other more specific budgetary criteria. A European Central Bank is
responsible for setting the official interest rate within the Euro zone.
EMU and the introduction of the Euro, however, present unique risks and
uncertainties for investors in EMU-participating countries, including:
(i) monetary and economic union on this scale has never before been
attempted; (ii) there is uncertainty whether participating countries will
remain committed to EMU in the face of changing economic conditions; (iii)
instability within EMU may increase the volatility of European markets and
may adversely affect the prices of securities of European issuers in the
fund's portfolio; (iv) there is uncertainty concerning the fluctuation of
the Euro relative to non-Euro currencies during the transition period from
January 1, 1999 to December 31, 2000, and beyond; and (v) there is no
assurance that interest rate, tax and labor regimes of EMU-participating
countries will converge over time. These and other factors may cause
market disruption and could adversely affect European securities and
currencies held by the fund.

Portfolio Turnover Each Fund may purchase or sell securities without
regard to the length of time the security has been held and thus may
experience a high rate of portfolio turnover. A 100% turnover rate would
occur, for example, if all the securities in a portfolio were replaced in
a period of one year. Under certain market conditions a Fund may
experience a high rate of portfolio turnover. The rate of portfolio
turnover is not a limiting factor when the Manager deems it desirable to
purchase or sell securities or to engage in options transactions. High
portfolio turnover involves correspondingly greater transaction costs,
including any brokerage commissions, which are borne directly by the
respective Fund and may increase the recognition of short-term, rather
than long-term, capital gains if securities are held for one year or less
and may be subject to applicable income taxes. (For further information
see "Portfolio Turnover" below).

Other Risks. In the event of a shortage of the underlying securities
deliverable on exercise of an option, the Options Clearing Corporation has
the authority to permit other, generally comparable securities to be
delivered in fulfillment of option exercise obligations. If the Options
Clearing Corporation exercises its discretionary authority to allow such
other securities to be delivered it may also adjust the exercise prices of
the affected options by setting different prices at which otherwise
ineligible securities may be delivered. As an alternative to permitting
such substitute deliveries, the Options Clearing Corporation may impose
special exercise settlement procedures.

The hours of trading for options on U.S. government securities may not
conform to the hours during which the underlying securities are traded.
To the extent that the options markets close before the markets for the
underlying securities, significant price and rate movements can take place
in the underlying markets that cannot be reflected in the options markets.

Options are traded on exchanges on only a limited number of U.S.
government securities, and exchange regulations limit the maximum number
of options which may be written or purchased by a single investor or a
group of investors acting in concert. The Company and other clients
advised by affiliates of Salomon Smith Barney may be deemed to constitute
a group for these purposes. In light of these limits, the Board of
Directors may determine at any time to restrict or terminate the public
offering of the Fund's shares (including through exchanges from the other
Funds).

Exchange markets in options on U.S. government securities are a relatively
new and untested concept. It is impossible to predict the amount of
trading interest that may exist in such options, and there can be no
assurance that viable exchange markets will develop or continue.

INVESTMENT RESTRICTIONS

Each Fund has adopted the following restrictions which may not be changed
with respect to any Fund without approval by the vote of a majority of
such Fund's outstanding voting shares, which is defined by the 1940 Act as
the lesser of (i) 67% or more of the voting securities present at a
meeting, if the holders of more than 50% of the outstanding voting
securities of the Fund are present or represented by proxy; or (ii) more
than 50% of the Fund's outstanding voting securities. The percentage
limitations need only be met at the time the investment is made or after
relevant action is taken.

The following restrictions apply to all Funds

A Fund shall not:

1. Lend money except by the purchase of bonds or other debt obligations
of types commonly offered publicly or privately and purchased by financial
institutions, including investments in repurchase agreements. A Fund will
not invest in repurchase agreements maturing in more than seven days
(unless subject to a demand feature) if any such investment, together with
any illiquid securities (including securities which are subject to legal
or contractual restrictions on resale) held by the Fund, exceeds 10% of
the market or other fair value of its total net assets (15% in the case of
International Fund); provided, however, that illiquid securities shall
exclude shares of other open-end investment companies owned by the Fund
but include the Fund's pro rata portion of the securities and other assets
owned by any such company. See "Repurchase Agreements";

2. Underwrite securities of other companies, except insofar as a Fund
might be deemed to be an underwriter for purposes of the Securities Act of
1933 (the "1933 Act") in the resale of any securities owned by the Fund;

3. Lend its portfolio securities in excess of 10% (15% in the case of
International Fund) of its total assets, both taken at market value,
provided that any loans shall be in accordance with the guidelines
established for such loans by the Trustees as described under "Loans of
Portfolio Securities," including the maintenance of collateral from the
borrower equal at all times to the current market value of the securities
loaned;

4. With respect to 75% of its assets, invest more than 5% of its assets
in the securities of any one issuer (except obligations of the
U.S. Government, its agencies or instrumentalities and repurchase
agreements secured thereby) or purchase more than 10% of the outstanding
voting securities of any one issuer. Neither limitation shall apply to
the acquisition of shares of other open-end investment companies to the
extent permitted by rule or order of the SEC exempting them from the
limitations imposed by Section 12(d)(1) of the 1940 Act;

5. Invest more than 25% of the value of its total assets in securities of
issuers in any particular industry; provided, however, this limitation
shall exclude shares of other open-end investment companies owned by the
Fund but include the Fund's pro rata portion of the securities and other
assets owned by any such company. (This does not restrict any of the
Funds from investing in obligations of the U.S. Government and repurchase
agreements secured thereby); and

6. With respect to all Funds other than International Fund, borrow in
excess of 10% of the market or other fair value of its total assets, or
pledge its assets to an extent greater than 5% of the market or other fair
value of its total assets, provided that so long as any borrowing exceeds
5% of the value of the Fund's total assets, the Fund shall not purchase
portfolio securities. Any such borrowings shall be from banks and shall
be undertaken only as a temporary measure for extraordinary or emergency
purposes. With respect to International Fund, borrow money from banks on
a secured or unsecured basis, in excess of 25% of the value of its total
assets. Deposits in escrow in connection with the writing of covered call
or secured put options, or in connection with the purchase or sale of
forward contracts, futures contracts, foreign currency futures and related
options, are not deemed to be a pledge or other encumbrance. This
restriction shall not prevent International Fund from entering into
reverse repurchase agreements, provided that reverse repurchase agreements
and any transactions constituting borrowing by the Fund may not exceed
33 1/3% of the Fund's net assets. International Fund may not mortgage or
pledge its assets except to secure borrowings permitted under this
restriction.

The following restrictions apply to Large Cap Fund and Growth and Income
Fund

Each of these Funds shall not:

1. Make any investment in real estate, commodities or commodities
contracts, or warrants except that the Funds may engage in transactions in
futures and related options, and Large Cap Funds may acquire warrants or
other rights to subscribe to securities of companies issuing such warrants
or rights, or of parents or subsidiaries of such companies, although Large
Cap Fund may not invest more than 5% of its net assets in such securities
valued at the lower of cost or market, nor more than 2% of its net assets
in such securities (valued on such basis) which are not listed on the New
York or American Stock Exchanges (warrants and rights represent options,
usually for a specified period of time, to purchase a particular security
at a specified price from the issuer). Warrants or rights acquired in
units or attached to other securities are not subject to the foregoing
limitations;

2. Purchase securities on margin, except that a Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities. The deposit or payment by a Fund of an initial or
variation margin in connection with futures contracts or related option
transactions is not considered the purchase of a security on margin;

3. Invest in securities of any company if any officer or trustee of the
Company or of the Manager owns more than 1/2 of 1% of the outstanding
securities of such company, and such officers and trustees own more than
5% of the outstanding securities of such issuer;

4. Invest in oil or other mineral leases, rights or royalty contracts or
exploration or development programs, except that Large Cap Fund and Growth
and Income Fund, may invest in the securities of companies which invest in
or sponsor such programs;

5. Invest in companies for the purpose of acquiring control or management
thereof;

6. Invest in the securities of other open-end investment companies, or
invest in the securities of closed-end investment companies except through
purchase in the open market in a transaction involving no commission or
profit to a sponsor or dealer (other than the customary brokers
commission) or as part of a merger, consolidation or other acquisition,
except that Large Cap Fund and Growth and Income Fund may acquire shares
of other open-end investment companies to the extent permitted by rule or
order of the SEC exempting them from the limitations imposed by
Section 12(d)(1) of the 1940 Act;

7. Purchase a restricted security or a security for which market
quotations are not readily available if as a result of such purchase more
than 5% of the Fund's assets would be invested in such securities;
provided, however, that with respect to Large Cap Fund and Growth and
Income Fund, this limitation shall exclude shares of other open-end
investment companies owned by the Fund but include the Fund's pro rata
portion of the securities and other assets owned by any such company.
Illiquid securities include securities subject to legal or contractual
restrictions on resale, which include repurchase agreements which have a
maturity of longer than seven days. This policy does not apply to
restricted securities eligible for resale pursuant to Rule 144A under the
1933 Act which the Trustees or the manager under Board approved guidelines
may determine are liquid nor does it apply to other securities for which,
notwithstanding legal or contractual restrictions on resale, a liquid
market exists;

8. Invest more than 5% of its assets in companies having a record
together with predecessors, of less than three years' continuous
operation, except that Large Cap Fund and Growth and Income Fund may
acquire shares of other open-end investment companies to the extent
permitted by rule or order of the SEC exempting them from the limitations
imposed by Section 12(d)(1) of the 1940 Act;

9. Engage in option writing for speculative purposes or purchase call or
put options on securities if, as a result, more than 5% of its net assets
of the Fund would be invested in premiums on such options; and

10. Purchase any security issued by any company deriving more than 25% of
its gross revenues from the manufacture of alcohol or tobacco.

The Company has adopted additional investment restrictions, with respect
to the above referenced Funds, which may be changed by the Trustees
without a vote of shareholders, as follows:

The Company shall not make short sales of securities unless at the time of
sale a Fund owns or has the right to acquire at no additional cost
securities identical to those sold short; provided that this prohibition
does not apply to the writing of options or the sale of forward contracts,
futures, foreign currency futures or related options.

Foreign Investments. Large Cap Fund and Growth and Income Fund may not
invest in the securities of a foreign issuer if, at the time of
acquisition, more than 20% of the value of the Fund's total assets would
be invested in such securities.

Futures Contracts and Options. In addition, Large Cap Fund and Growth
and Income Fund may not write, purchase or sell puts, calls or
combinations thereof, except that each Fund may (a) write covered call
options with respect to any part or all of its portfolio securities, write
secured put options, or enter into closing purchase transactions with
respect to such options, (b) purchase and sell put options to the extent
that the premiums paid for all such options do not exceed 10% of its total
assets and only if the Fund owns the securities covered by the put option
at the time of purchase, and (c) engage in futures contracts and related
options transactions as described herein. Large Cap Fund and Growth and
Income Fund may purchase put and call options which are purchased on an
exchange in other markets, or currencies and, as developed from time to
time, various futures contracts on market indices and other instruments.
Purchasing options may increase investment flexibility and improve total
return, but also risks loss of the option premium if an asset the Fund has
the option to buy declines in value.

The following restrictions apply to International Fund:

The Fund shall not:

1. Make any investment in real estate, commodities or commodities
contracts, except that each Fund may engage in transactions in forward
commitments, currency transactions, futures contracts, foreign currency
futures and related options and may purchase or sell securities which are
secured by real estate or interests therein; and

2. Issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit a Fund from (i) making and
collateralizing any permitted borrowings, (ii) making any permitted loans
of its portfolio securities, or (iii) entering into repurchase agreements,
utilizing options, futures contracts and foreign currency futures and
options thereon, forward contracts, forward commitments and other
investment strategies and instruments that would be considered "senior
securities" but for the maintenance by the Fund of a segregated account
with its custodian or some other form of "cover."

The Company has adopted additional investment restrictions with respect to
International Fund, which may be changed by the Trustees without a vote of
shareholders. These restrictions provide that the Fund shall not:

1. Purchase securities on margin, except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities. The deposit or payment by the Fund of an initial or
variation margin in connection with forward contracts, futures contracts,
foreign currency futures or related option transactions is not considered
the purchase of a security on margin;

2. Invest in securities of any company if any officer or trustee of the
Company or of the manager owns more than 1/2 of 1% of the outstanding
securities of such company, and such officers and trustees own more than
5% of the outstanding securities of such issuer;

3. Invest in oil or other mineral leases, rights or royalty contracts or
exploration or development programs, except that International Fund may
invest in the securities of companies which invest in or sponsor such
programs;

4. Invest in companies for the purpose of acquiring control or management
thereof;

5. Invest in the securities of other open-end investment companies, or
invest in the securities of closed-end investment companies except through
purchase in the open market in a transaction involving no commission or
profit to a sponsor or dealer (other than the customary brokers
commission) or as part of a merger, consolidation or other acquisition,
except that International Fund, may acquire shares of other open-end
investment companies to the extent permitted by rule or order of the SEC
exempting them from the limitations imposed by Section 12(d)(1) of the
1940 Act;

6. Purchase an illiquid security if, as a result of such purchase, more
than 15% of the Fund's net assets would be invested in such securities;
provided, however, that with respect to International Fund, this
limitation shall exclude shares of other open-end investment companies
owned by the Fund but include the Fund's pro rata portion of the
securities and other assets owned by any such company. Illiquid
securities include securities subject to legal or contractual restrictions
on resale, which include repurchase agreements which have a maturity of
longer than seven days. This policy does not apply to restricted
securities eligible for resale pursuant to Rule 144A under the 1933 Act
which the Trustees or the manager or Subadviser under Board-approved
guidelines, may determine are liquid nor does it apply to other securities
for which, notwithstanding legal or contractual restrictions on resale, a
liquid market exists;

7. Make short sales of securities, unless at the time of sale the Fund
owns or has the right to acquire at no additional cost securities
identical to those sold short; provided that this prohibition does not
apply to the writing of options or the sale of forward contracts, futures,
foreign currency futures or related options; and

8. Invest more than 5% of its net assets in warrants or rights valued at
the lower of cost or market, nor more than 2% of its net assets in
warrants or rights (valued on such basis) which are not listed on the New
York or American Stock Exchanges. Warrants or rights acquired in units or
attached to other securities are not subject to the foregoing limitations.

Futures Contracts and Options. In addition, International Fund may
purchase put and call options which are purchased on an exchange in other
markets, or currencies and, as developed from time to time, various
futures contracts on market indices and other instruments. Purchasing
options may increase investment flexibility and improve total return, but
also risks loss of the option premium if an asset the Fund has the option
to buy declines in value.

BROKERAGE

The manager is responsible for decisions to buy and sell securities for
the Global Company and for the placement of its portfolio business and the
negotiation of any commissions paid on such transactions. It is the
policy of the Manager to seek the best security price available with
respect to each transaction. In over-the-counter transactions, orders are
placed directly with a principal market maker unless it is believed that
a better price and execution can be obtained by using a broker. Except to
the extent that the Company may pay higher brokerage commissions for
brokerage and research services (as described below) on a portion of its
transactions executed on securities exchanges, the manager seeks the best
security price at the most favorable commission rate. From time to time,
the Fund may place brokerage transactions with affiliated persons of the
manager. In selecting broker/dealers and in negotiating commissions, the
manager considers the firm's reliability, the quality of its execution
services on a continuing basis and its financial condition. When more
than one firm is believed to meet these criteria, preference may be given
to firms that also provide research services to the Company or the
manager.

Section 28(e) of the Securities Exchange Act of 1934 ("Section 28(e)")
permits an investment adviser, under certain circumstances, to cause an
account to pay a broker or dealer who supplies brokerage and research
services a commission for effecting a securities transaction in excess of
the amount of commission another broker or dealer would have charged for
effecting the transaction. Brokerage and research services include
(a) furnishing advice as to the value of securities, the advisability of
investing in, purchasing or selling securities, and the availability of
securities or purchasers or sellers of securities, (b) furnishing analyses
and reports concerning issuers, industries, securities, economic factors
and trends, portfolio strategy, and the performance of accounts,
(c) effecting securities transactions and performing functions incidental
thereto (such as clearance, settlement and custody), and (d) furnishing
other products or services that assist the manager or the Subadviser in
fulfilling their investment-decision making responsibilities.

Pursuant to provisions of the relevant Advisory Agreement, the Trustees
have authorized the manager to cause the Company to incur brokerage
commissions in an amount higher than the lowest available rate in return
for research services provided to the manager. The manager is of the
opinion that the continued receipt of supplemental investment research
services from dealers is essential to its provision of high quality
portfolio management services to the Company. The manager undertakes that
such higher commissions will not be paid by the Company unless (a) the
manager determines in good faith that the amount is reasonable in relation
to the services in terms of the particular transaction or in terms of the
manager's overall responsibilities with respect to the accounts as to
which it exercises investment discretion, (b) such payment is made in
compliance with the provisions of Section 28(e) and other applicable state
and federal laws, and (c) in the opinion of the manager, the total
commissions paid by the Company are reasonable in relation to the expected
benefits to the Company over the long term. The investment advisory fees
paid by the Company under the Advisory Agreements are not reduced as a
result of the manager's receipt of research services. During the fiscal
year ended October 31, 1999, the Company directed the payment of $347,989
in brokerage commissions to brokers because of research services provided.

To the extent consistent with the NASD Rules, and subject to seeking best
execution and such other policies as the Trustees may determine, the
manager may consider sales of shares of the Company as a factor in the
selection of firms to execute portfolio transactions for the Company.

The manager places portfolio transactions for other advisory accounts
including other investment companies. Research services furnished by
firms through which the Funds effect their securities transactions may be
used by the manager in servicing all of its accounts; not all of such
services may be used by the manager in connection with the Funds. In the
opinion of the manager, the benefits from research services to the Funds
of the Company and to the accounts managed by the manager cannot be
measured separately. Because the volume and nature of the trading
activities of the accounts are not uniform, the amount of commissions in
excess of the lowest available rate paid by each account for brokerage and
research services will vary. However, in the opinion of the manager, such
costs to the Funds will not be disproportionate to the benefits received
by the Funds on a continuing basis.

The manager will seek to allocate portfolio transactions equitably
whenever concurrent decisions are made to purchase or sell securities by
the Funds and other accounts that the manager may establish in the future.
In some cases, this procedure could have an adverse effect on the price
or the amount of securities available to the Funds. In making such
allocations among the Company and other advisory accounts, the main
factors considered by the manager over the respective investment
objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, and the
size of investment commitments generally held.

The following table summarizes for each Fund the total brokerage
commissions paid.

Fiscal
Year
Ended
10/31
Internationa
l

Large Cap

Growth &
Income

1999
$163,053
$2,767,64
8
$587,368
1998
$142,261
$8,191,23
7
$1,123,715
1997
$115,016
$10,105,4
82
$2,428,087

The Funds may from time to time place brokerage transactions with brokers
that may be considered affiliated persons of the manager. Such affiliated
persons currently include Robinson Humphrey, Inc. ("Robinson Humphrey").
For the periods covered below (including those prior to December 31,
1997, when the manager assumed investment advisory responsibilities from
VKAC), Smith Barney and Robinson Humphrey were affiliated with PFS
Distributors, Inc., which was the Distributor prior to October 8, 1998.
As of October 31, 1996, Morgan Stanley Group Inc. ("Morgan Stanley")
became an affiliate of VKAC and as of May 31, 1997, Dean Witter Discover
& Co. ("Dean Witter") also became an affiliate of VKAC. Effective
December 31, 1997, Morgan Stanley and Dean Witter were no longer
affiliated with the manager or the Distributor (or its predecessor). The
Board of Companyees has adopted procedures designed to ensure that
commissions paid to an affiliated broker on any transaction would be
comparable to that payable to a non-affiliated broker in a similar
transaction.

The Funds paid the following commissions to affiliated brokers during the
periods shown:

Salomon
Robinson Smith
Fiscal 1999 Commissions Humphrey Barney

International - $6,872
Large Cap Growth $3,000 $120,692
Growth & Income - $42,940

Fiscal 1999 Percentage

International - 4.21%
Large Cap 0.11% 4.36%
Growth & Income - 7.31%

Percentage of Transactions with
Affiliates to Total Transactions Salomon
Robinson Smith
Humphrey Barney

International - 3.56%
Large Cap 0.10% 2.84%
Growth & Income - 5.98%

Salomon
Robinson Smith
Fiscal 1998 Commissions Humphrey Barney

International -0- 9,442
Large Cap 34,230 363,234
Growth & Income 3,300 99,771

Fiscal 1998 Percentage

International N/A 6.60%
Large Cap 0.42% 4.43%
Growth & Income 0.29% 8.88%

Percentage of Transactions with
Affiliates to Total Transactions Salomon
Robinson Smith
Humphrey Barney

International - 7.30%
Large Cap Growth 0.52% 3.94%
Growth & Income 0.15% 9.12%

Salomon
Robinson Smith Morgan Dean
Fiscal 1997 Commissions Humphrey Barney Stanley
Witter

International - - $9,368
-
Large Cap $4,500 $327,320 20,688
$17,100
Growth & Income - 90,639 375 -

Fiscal 1997 Percentage

International - - 8.14% -
Large Cap 0.04% 3.24% 0.20% 0.17%
Growth & Income - 3.73% 0.02% -

Percentage of Transactions with
Affiliates to Total Transactions

International - - 1.43% -
Large Cap - 0.04% - 0.28%
Growth & Income - - - -

PORTFOLIO TURNOVER

For reporting purposes, a Fund's portfolio turnover rate is calculated by
dividing the lesser of purchases or sales of portfolio securities for the
fiscal year by the monthly average of the value of the portfolio
securities owned by the Fund during the fiscal year. In determining such
portfolio turnover, all securities whose maturities at the time of
acquisition were one year or less are excluded. A 100% portfolio turnover
rate would occur, for example, if all of the securities in the Fund's
investment portfolio (other than short-term money market securities) were
replaced once during the fiscal year. Portfolio turnover will not be a
limiting factor should SSB Citi deem it advisable to purchase or sell
securities.

For the fiscal years ended October 31, 1997,1998 and 1999, the portfolio
turnover rates were as follows:

Fund
1997
1998
1999
Large Cap Fund
165%
113%
37%
Growth and Income Fund
93%
34%
53%
International Fund
57%
63%
50%

Increased portfolio turnover necessarily results in correspondingly
greater brokerage commissions which must be paid by the Fund. To the
extent portfolio trading results in realization of net short-term capital
gains, shareholders will be taxed on such gains at ordinary tax rates
(except shareholders who invest through IRAs and other retirement plans
which are not taxed currently on accumulations in their accounts).

SSB Citi manages a number of private investment accounts on a
discretionary basis and it is not bound by the recommendations of the
Salomon Smith Barney research department in managing the Funds. Although
investment decisions are made individually for each client, at times
decisions may be made to purchase or sell the same securities for one or
more of the Funds and/or for one or more of the other accounts managed by
SSB Citi. When two or more such accounts simultaneously are engaged in
the purchase or sale of the same security, transactions are allocated in
a manner considered equitable to each, with emphasis on purchasing or
selling entire orders wherever possible. In some cases, this procedure
may adversely affect the price paid or received by the Fund or the size of
the position obtained or disposed of by the Fund.

DISTRIBUTOR

Effective June 5, 2000, Salomon Smith Barney, Inc., located at 388
Greenwich Street , New York, New York, 10013 and PFS serve as the fund's
co-distributors pursuant to a written agreement dated June 5, 2000 (the
"Distribution Agreement") which was approved by the fund's Board of
Directors, including a majority of the independent directors, on April
17, 2000. Prior to and up to June 5, 2000, CFBDS, Inc. acted as a
Distributor.

The Distributor may be deemed to be an underwriter for purposes of the
Securities Act of 1933. From time to time, the Distributor, or any
Other Service Agent (collectively, "Service Agents"), or any of their
affiliates, may also pay for certain non-cash sales incentives provided
to PFS Investments registered representatives or, as applicable, other
financial professionals (collectively, "Financial Professionals"). Such
incentives do not have any effect on the net amount invested. In
addition to the reallowances from the applicable public offering price
described above, Service Agents may, from time to time, pay or allow
additional reallowances or promotional incentives, in the form of cash
or other compensation to Financial Professionals that sell shares of
each Fund.

The Distributor may make payments for distribution and/or shareholder
servicing activities out of its past profits and other available
sources. The Distributor may also make payments for marketing,
promotional or related expenses to dealers. The amount of these
payments is determined by the distributor and may vary. Citigroup and
its affiliates may make similar payments under similar arrangements.

The Distributor acts as the principal underwriter of the shares of the
Company pursuant to a written agreement for the Funds ("Underwriting
Agreement"). The Distributor has entered into a selling agreement with
PFS Distributors, Inc. on behalf of PFS Investments (collectively,
"PFS") and with one or more Other Service Agents giving the Service
Agents the right to sell shares of each Fund of the Company on behalf of
the Distributor. The Distributor's obligation is an agency or "best
efforts" arrangement under which the Distributor is required to take and
pay only for such shares of each Fund as may be sold to the public. The
Distributor is not obligated to sell any stated number of shares. The
Underwriting Agreement is renewable from year to year if approved (a) by
the Trustees or by a vote of a majority of the Company's outstanding
voting securities, and (b) by the affirmative vote of a majority of
Trustees who are not parties to the Agreement or interested persons of
any party by votes cast in person at a meeting called for such purpose.
The Underwriting Agreement provides that it will terminate if assigned,
and that it may be terminated without penalty by either party on
60 days' written notice.

Initial Sales Charges - Class A and Class 1.

The following table shows commissions paid as initial sales charges on
Class A and Class 1 shares, amounts retained by the Distributor and
amounts received by PFS Investments during the periods ended October 31,
1999, 1998, and 1997. Prior to June 5, 2000 CFBDS was distributor and
prior to October 8, 1998, PFS Distributors, Inc. acted as Distributor,
and prior to the date of this SAI, PFS was the sole Service Agent.

Internationa
l

Large Cap

Growth & Income

October 31, 1999

Total Underwriting
Commissions*
$221,113
$13,988,68
0
$4,069,851
Amount Retained By
Distributor
16,578
2,082,115
509,045
Amount Received By PFS
Investments
204,535
11,906,565
3,560,805

October 31, 1998

Total Underwriting
Commissions**
$228,945
$11,625,88
6
$4,604,451
Amount Retained By
Distributor
21,062
2,349,255
656,152
Amount Received By PFS
Investments
207,883
12,276,631
3,948,259

October 31, 1997
Internatio
nal
Large Cap
Growth &
Income

Total Underwriting
Commissions
$350,629
$16,295,440
$5,171,583
Amount Retained By
Distributor
37,022
2,787,467
825,074
Amount Received By PFS
Investments
313,607
13,507,833
4,346,509

* Of these totals, the following amounts were paid to PFS Distributors,
Inc.: $199,002; $12,589,812, and $3,662,866, for the above listed
funds, respectively.

**For the period November 1, 1997 through October 7, 1998 and for the
period October 8, 1998 through October 31, 1998, the commissions were as
follows:

Name of Fund
11/01/97
through
10/07/98+
10/08/98
through
10/31/98++
Large Cap
$16,442,770
$1,032,664
Growth & Income
$6,490,528
$279,461
International
$471,895
$18,132

+The entire amount was paid to PFS Distributors, Inc.
++ The following amounts were paid to PFS Distributors, Inc.: $102,101;
$16,319, and $34,874 for the above listed funds, respectively.

DISTRIBUTION PLANS

Rule 12b-1 adopted by the SEC under the 1940 Act permits an investment
company to directly or indirectly pay expenses associated with the
distribution of its shares (''distribution expenses'') and servicing its
shareholders in accordance with a plan adopted by the investment
company's board of directors and approved by its shareholders. Pursuant
to such Rule, the Company has adopted three Distribution Plans
(hereinafter referred to as the ''Class A Plan'', "Class L Plan" and the
''Class B Plan'') for its Class A shares, Class L Shares and Class B
shares, respectively. The Rules of Conduct of the National Association
of Securities Dealers, Inc. (''NASD Rules'') limit the annual
distribution costs and service fees that a mutual fund may impose on a
class of shares. The NASD Rules also limit the aggregate amount which a
Fund may pay for such distribution costs.

Under the Class A Plan each Fund pays PFS Distributors, Inc. and Salomon
Smith Barney, as administrative agents for PFS Accounts and Other
Accounts, respectively (the "Administrative Agents") 0.25% per annum of
its average daily net assets attributable to such class of shares as a
service fee. The service fee is intended to cover shareholder and
account maintenance services provided to Class A shareholders of each
Fund by Financial Professionals.

Under the Class B Plan and Class L Plan, Class B and Class L,
respectively, shares of each Fund are subject to a combined annual
distribution fee and service fee at the rate of 1.00% of a Fund's
aggregate average daily net assets attributable to such class of shares,
which fees are paid to the Administrative Agents. Payments are made by
each Fund under the Plans of 0.25% per annum, and distribution fee
payments of 0.75% per annum, of the aggregate average daily net assets
attributable to the shares. The distribution fee payments are used as
compensation for sales and promotional activities and marketing of the
shares. The expenditures under the Plans may consist of sales
commissions to Financial Professionals for selling shares, compensation,
sales incentives and payments to sales and marketing personnel, and the
payment of expenses incurred in its sales and promotional activities,
including advertising expenditures related to the shares of a Fund and
the costs of preparing and distributing promotional materials with
respect to such shares.

The Distributor is entitled to receive the proceeds of the initial sales
charge, if any, paid upon the purchase of Class A shares, and said
amount is paid to Financial Professionals. PFS and Salomon Smith Barney
are entitled to receive the contingent deferred sales charge paid upon
certain redemptions of Class B and L shares directly from the Fund, for
PFS Accounts and other Accounts, respectively, for any of the
distribution and service expenses described above.

During the period they are in effect, the Plans obligate each Fund to
pay fees as compensation for service (and for the Class B and L Plans,
distribution) activities, not as reimbursement for specific expenses
incurred. Thus, even if such expenses exceed service or distribution
fees paid by any Fund, the Fund will not be obligated to pay more than
those fees and, if expenses are less than such fees, the Administrative
Agents may retain the full fees and realize a profit. Each Fund will
pay the applicable service fees and distribution fees until either the
applicable Plan is terminated or not renewed. In that event, expenses in
excess of service fees and distribution fees received or accrued through
the termination date will be the sole responsibility of and not
obligations of a Fund. In their annual consideration of the
continuation of each Fund's Plans, the Trustees will review each Plan
and the corresponding expenses for each class separately.

Actual distribution expenditures incurred by the Administrative Agents
and Service Agents under the Class B Plan for any given year are
expected to exceed the fees received by them form the Funds pursuant to
the Class B Plan and pursuant to contingent deferred sales charges. Such
excess will not be carried forward in future years. If the Class B Plan
is terminated or is not continued, the Fund would not be contractually
obligated and has no liability to pay for any expenses incurred that
have not previously reimbursed by the Fund or recovered through
contingent deferred sales charges.

In reporting amounts expended under the Plans to the Trustees, expenses
attributable to the sale of both Class A and Class B shares will be
allocated to each class based on the ratio of sales of Class A and
Class B shares to the sales of both classes of shares. The service fees
paid by the Class A shares will not be used to subsidize the sale of
Class B shares; similarly, the service fees, if any, and distribution
fees paid by the Class B shares will not be used to subsidize the sale
of Class A shares.

As required by Rule 12b-1 under the 1940 Act, each Plan and the forms of
related service agreements were approved by the Board of Trustees,
including a majority of the Trustees who are not interested persons (as
defined in the 1940 Act) of the Company and who have no direct or
indirect financial interest in the operation of the Plans or in any
agreements related to each Plan ("Independent Trustees"). In doing so,
the Board of Trustees determined that there is a reasonable likelihood
that each Plan will benefit the Company and its shareholders.

Each Plan requires that the Trustees be provided at least quarterly with
a written report of the amounts expended pursuant to each Plan and the
purposes for which such expenditures were made. Unless sooner
terminated in accordance with its terms, the Plans continue in effect so
long as such continuance is specifically approved at least annually by
the Trustees, including a majority of Independent Trustees.

Each Plan may be terminated by vote of a majority of the Independent
Trustees, or by vote of a majority of the outstanding voting shares of
the relevant class, for any Fund. Any change in any of the Plans that
would materially increase the distribution or service expenses borne by
a class of a Fund requires shareholder approval by the relevant class;
otherwise, it may be amended by a majority of the Trustees, including a
majority of the Independent Trustees, by vote cast in person at a
meeting called for the purpose of voting upon such amendment. So long
as a Plan is in effect, the selection or nomination of any additional
Independent Trustees is committed to the discretion of the Independent
Trustees.

For the fiscal year ended October 31, 1999, the aggregate expenses for
the International Fund under the Fund's Class A Plan were $65,440 or
0.25%, respectively, of the Class A shares' average net assets. For the
fiscal year ended October 31, 1999, the Fund's aggregate expenses under
the Class B Plan were $256,597 or 1.00% of the Class B shares' average
net assets. Such expenses included $57,908 for commissions and
transaction fees and $173,664 for fees paid for servicing Class B
shareholders and administering the Class B Plan.

For the fiscal year ended October 31, 1999, the aggregate expenses for
the Large Cap Fund under the Class A Plan were $659,586 or 0.25%,
respectively, of the Class A shares' average net assets. For the fiscal
year ended October 31, 1999, the Fund's aggregate expenses under the
Class B Plan were $2,669,544 or 1.00% of the Class B shares' average net
assets. Such expenses included $618,460 for commissions and transaction
fees and $1,855,380 for fees paid for servicing Class B shareholders and
administering the Class B Plan.

For the fiscal year ended October 31, 1999, the aggregate expenses for
the Growth and Income Fund under the Fund's Class A Plan were $394,715
or 0.25%, respectively, of the Class A shares' average net assets. For
the fiscal year ended October 31, 1999, the Fund's aggregate expenses
under the Class B Plan were $1,751,910 or 1.00% of the Class B shares'
average net assets. Such expenses included $416,008 for commissions and
transaction and $1,248,025 for fees paid for servicing Class B
shareholders and administering the Class B Plan.

The Distributor and/or Service Agents bear the cost of printing (but not
typesetting) prospectuses used in connection with this offering and the
cost and expense of supplemental sales literature, promotion and
advertising. The Company pays all expenses attributable to the
registrations of its shares under federal and state blue sky laws,
including registration and filing fees, the cost of preparation of the
prospectuses, related legal and auditing expenses, and the cost of
printing prospectuses for current shareholders.

For the fiscal year ended October 31, 1999, the Distributor and/or Service
Agents incurred the following distribution expenses for the funds:

Fund Name

Advertis
ing

Printing
and
Mailing
of
Prospectu
ses

Support
Service
s

Financial
Profession
als

Interes
t
Expense

Total
Internatio
nal
$699
$3,833
-
$95,916
$53,643
$154,091
Large Cap
$8,551
$47,829
-
$990,174
$450,98
9
$1,497,5
43
Growth and
Income

$5,387

$29,720

$609,161

$364,00
2

$1,008,2
70

The Distributor and/or Service Agents will pay for the printing, at
printer's overrun cost, of prospectuses and periodic reports after they
have been prepared, set in type and mailed to shareholders, and will also
pay the cost of distributing such copies used in connection with the
offering to prospective investors and will also pay for supplementary
sales literature and other promotional costs. Such expenses incurred by
the Distributor and/or Service Agents are distribution expenses within the
meaning of the Plans and may be paid from amounts received by the
Distributor and/or Service Agents from the Company under the Plans.

DETERMINATION OF NET ASSET VALUE

The assets attributable to the shares of each Fund reflect the value of
separate interests in a single portfolio of securities. The net asset
value of each class will be determined separately by subtracting the
expenses and liabilities allocated to that class. The net asset value of
the shares of each Fund is determined at 4:00 p.m., New York time (or at
the close of the New York Stock Exchange (the "Exchange"), if earlier,
on each business day on which the Exchange is open.

The value of equity securities is computed by (i) valuing listed or
unlisted securities for market quotations are readily available at the
prices reported by an independent pricing services, or as supplied by
the National Association of Securities Dealers Automated Quotations
(NASDAQ) or by broker-dealers, and (ii) valuing any securities for which
market quotations are not readily available and any other assets at fair
value as determined in good faith by the Board of Trustees. Options on
stocks, options on stock indexes and stock index futures contracts and
options thereon, which are traded on exchanges, are valued (at their
last sales or settlement price as of the close of such exchanges, or, if
no sales are reported, at the mean between the last reported bid and
asked prices).

Foreign securities trading may not take place on all days on which the
Exchange is open. Further, trading takes place in various foreign
markets on days on which the Exchange is not open. Events affecting the
values of investments that occur between the time their prices are
determined and 4:00 p.m. Eastern time on each day that the Exchange is
open will not be reflected in a Fund's net asset value unless the
manager, under the supervision of the Board of Trustees, determines that
the particular event would materially affect net asset value. As a
result, a Fund's net asset value may be significantly affected by such
trading on days when a shareholder has no access to the Funds.

U.S. Government securities are traded in the over-the-counter market and
valuations are based on quotations of one of more dealers that make
markets in the securities as obtained from such dealers or from a
pricing service. Options and interest rate futures contracts and
options thereon, which are traded on exchanges, are valued at their last
sales or settlement price as of the close of such exchanges, or, if no
sales are reported, at the mean between the last reported bid and asked
prices. Debt securities having a remaining maturity of 60 days or less
are valued on an amortized cost basis to the extent this approximates
market value.

When, in the judgment of the service, quoted bid prices for investments
are readily available and are representative of the bid side of the
market, these investments are valued at such quoted bid prices (as
obtained by the service from dealers in such securities). Other
investments are carried at fair value as determined by the service,
based on methods which include consideration of: yields or prices of
municipal bonds of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions.
The service may employ electronic data processing techniques and/or a
matrix system to determine valuations. Any assets which are not valued
by the Service would be valued at fair value using methods determined in
good faith by the Trustees.

PURCHASE AND REDEMPTION OF SHARES

Alternative Purchase Arrangements. Each Fund offers two Classes of
shares to investors purchasing through PFS Accounts four classes through
Other Accounts. Class A shares are sold to investors with an initial
sales charge and Class B shares are sold without an initial sales charge
but are subject to a contingent deferred sales charge ("CDSC") payable
upon certain redemptions. In addition, the Funds offer Class 1 shares
only to Eligible Class 1 Purchasers through PFS Accounts.

In deciding which Class of Fund shares to purchase, investors should
consider the following factors, as well as any other relevant facts and
circumstances:

Intended Holding Period. The decision as to which Class of shares is
more beneficial to an investor depends on the amount and intended
duration of his or her investment. Shareholders who are planning to
establish a program of regular investment may wish to consider Class A
shares; as the investment accumulates shareholders may qualify for
reduced sales charges and the shares are subject to lower ongoing
expenses over the term of the investment. As an alternative, Class B
shares are sold without any initial sales charge so the entire purchase
price is immediately invested in a Fund. Any investment return on these
additional invested amounts may partially or wholly offset the higher
annual expenses of this Class. Because a Fund's future return cannot be
predicted, however, there can be no assurance that this would be the
case.

Reduced or No Initial Sales Charge. The initial sales charge on Class A
shares may be waived for certain eligible purchasers, and the entire
purchase price will be immediately invested in a Fund. In addition,
Class A share purchases of $500,000 or more will be made at net asset
value with no initial sales charge, but will be subject to a CDSC of
1.00% on redemptions made within 12 months of purchase. The $500,000
investment may be met by adding the purchase to the net asset value of
all Class A shares offered with a sales charge held in funds listed
below under "Exchange Privilege." Class A share purchases also may be
eligible for a reduced initial sales charge. Because the ongoing
expenses of Class A shares may be lower than those for Class B shares,
purchasers eligible to purchase Class A shares at net asset value or at
a value or at a reduced sales charge should consider doing so.

Financial Professionals may receive different compensation for selling
different Classes of shares. Investors should understand that the
purpose of the CDSC on the Class B shares is the same as that of the
initial sales charge on the Class A shares.

How to Purchase Shares. The procedures for purchasing shares varies
according to whether you purchase through a PFS Account or Other
Account:

PFS ACCOUNTS

Initial purchases of shares of each Fund must be made through a PFS
Investments Registered Representative by completing the appropriate
application. The completed application should be forwarded to the Sub-
Transfer Agent, 3100 Breckinridge Blvd., Bldg. 200, Duluth, Georgia
30099-0062. Checks drawn on foreign banks must be payable in U.S.
dollars and have the routing number of the U.S. bank encoded on the
check. Subsequent investments may be sent directly to the Sub-Transfer
Agent. In processing applications and investments, the Sub-Transfer
Agent acts as agent for the investor and for PFS Investments and also as
agent for the Distributor, in accordance with the terms of the
Prospectus. If the Sub-Transfer Agent ceases to act as such, a
successor company named by the Company will act in the same capacity so
long as the account remains open.

Shares purchased will be held in the shareholder's account by the Sub-
Transfer Agent. Share certificates are issued only upon a shareholder's
written request to the Sub-Transfer Agent. A shareholder who has
insufficient funds to complete any purchase, will be charged a fee of
$30 per returned purchase by PFS or the Sub-Transfer Agent.

Investors in Class A and Class B shares may open an account by making an
initial investment of at least $1,000 for each account in each Class
(except for Systematic Investment Plan accounts), or $250 for an IRA or
a Self-Employed Retirement Plan in a Fund. Subsequent investments of at
least $50 may be made for each Class. For participants in retirement
plans qualified under Section 403(b)(7) or Section 401(a) of the Code,
the minimum initial investment requirement for Class A and Class B
shares and the subsequent investment requirement for each Class in a
Fund is $25. For each Fund's Systematic Investment Plan, the minimum
initial investment requirement for Class A and Class B shares and the
subsequent investment requirement for each Class is $25. There are no
minimum investment requirements in Class A shares for employees of
Citigroup and its subsidiaries, including Salomon Smith Barney,
Directors or Trustees of any of the Smith Barney Mutual Funds, and their
spouses and children. The Company reserves the right to waive or change
minimums, to decline any order to purchase its shares and to suspend the
offering of shares from time to time. Purchase orders received by the
Sub-Transfer Agent or Sub-Transfer Agent prior to the close of regular
trading on the NYSE, on any day a Fund calculates its net asset value,
are priced according to the net asset value determined on that day.

Upon completion of certain automated systems, initial purchases of Fund
shares may be made by wire. The minimum investment that can be made by
wire is $10,000. Before sending the wire, the PFS Investments Inc.
Registered Representative must contact the Sub-Transfer Agent at (800)
665-8677 to obtain proper wire instructions. Once an account is open, a
shareholder may make additional investments by wire. The shareholder
should contact the Sub-Transfer Agent at (800) 544-5445 to obtain proper
wire instructions.

Upon completion of certain automated systems, shareholders who establish
telephone transaction authority on their account and supply bank account
information may make additions to their accounts at any time.
Shareholders should contact the Sub-Transfer Agent at (800) 544-5445
between 9:00 a.m. and 6:00 p.m. eastern time any day that the NYSE is
open. If a shareholder does not wish to allow telephone subsequent
investments by any person in his account, he should decline the
telephone transaction option on the account application. The minimum
telephone subsequent investment is $250 and can be up to a maximum of
$10,000. By requesting a subsequent purchase by telephone, you
authorize the Sub-Transfer agent to transfer funds from the bank account
provided for the amount of the purchase. A shareholder who has
insufficient funds to complete the transfer will be charged a fee of up
to $30 by PFS or the Sub-Transfer Agent. A shareholder who places a
stop payment on a transfer or the transfer is returned because the
account has been closed, will also be charged a fee of up to $30 by PFS
or the Sub-Transfer Agent. Subsequent investments by telephone may not
be available if the shareholder cannot reach the Sub-Transfer Agent
whether because all telephone lines are busy or for any other reason; in
such case, a shareholder would have to use the Fund's regular subsequent
investment procedure described above.

OTHER ACCOUNTS

Each Service Agent has agreed to transmit to its customers who are
shareholders of the Fund appropriate prior written disclosure of any
fees that it may charge them directly. Each Service Agent is
responsible for transmitting promptly orders of its customers. Your
Service agent is the shareholder of record for the shares of the Fund
you own.

Investors may be able to establish new accounts in the fund under one of
several tax-sheltered plans. Such plans include IRAs, Keogh or
Corporate Profit-Sharing and Money-Purchase Plans, 403(b) Custodian
Accounts, and certain other qualified pension and profit-sharing plans.
Investors should consult with their Service Agent and their tax and
retirement advisers.

Systematic Investment Plan. Shareholders may make additions to their
accounts at any time by purchasing shares through a service known as the
Systematic Investment Plan. Under the Systematic Investment Plan, the
Sub-Transfer Agent or Service Agent is authorized through preauthorized
transfers of $25 or more to charge the regular bank account or other
financial institution indicated by the shareholder on a monthly basis to
provide systematic additions to the shareholder's Fund account. For PFS
Accounts, a shareholder who has insufficient funds to complete the
transfer will be charged a fee of up to $25, and a shareholder who
places a stop payment on a transfer or the transfer is returned because
the account has been closed, will also be charged a fee of $25.

Initial Sales Charge Alternative - Class A Shares. The sales charges
applicable to purchases of Class A shares of the Funds are as follows:

Sales Charge

Broker Dealer
Commission as % of
Offering Price
Amount of
Investment

% of
Offering Price
% of Net
Amount Invested

Less than $ 25,000
5.00%
5.26%
4.50%
$ 25,000 - 49,999
4.25
4.44
3.83
50,000 - 99,999
3.75
3.90
3.38
100,000 - 249,999
3.25
3.36
2.93
250,000 - 499,999
2.75
2.83
2.48
500,000 and over
2.00
2.04
1.80
$1,000,000 or more
-0-
-0-
Up to 1.00*

*Purchases of Class A shares of $500,000 or more will be made at net
asset value without any initial sales charge, but will be subject to a
CDSC of 1.00% on redemptions made within 12 months of purchase.

Members of the selling group may receive up to 90% of the sales charge
and may be deemed to be underwriters of the Fund as defined in the
Securities Act of 1933, as amended. The reduced sales charges shown
above apply to the aggregate of purchases of Class A Shares of a Fund
made at one time by ''any person'', which includes an individual and his
or her immediate family, or a trustee or other fiduciary of a single
trust estate or single fiduciary account.

Initial Sales Charge Waivers. The initial sales charge does not apply
to Class A shares acquired through the reinvestment of dividends and
capital gains distributions.

PFS ACCOUNTS

Purchases of Class A shares through PFS Accounts may be made at net
asset value without a sales charge in the following circumstances:

(a) sales to Board Members and employees of Citigroup and its
subsidiaries;
(b) sales to Board Members of the Smith Barney Mutual Funds or any other
mutual funds for which members of Citigroup act as investment
advisor, administrator or service agent (including retired Board
Members); the immediate families of such persons (including the
surviving spouse of a deceased Board Member); and to a pension,
profit-sharing or other benefit plan for such persons;
(c) sales to employees of member firms of the National Association of
Securities Dealers, Inc., provided such sales are made upon the
assurance of the purchaser that the purchase is made for investment
purposes and that the securities will not be resold except through
redemption or repurchase;
(d) issuance to any other investment company to effect the combination of
such company with the Fund by merger, acquisition of assets or
otherwise;
(e) purchases by shareholders who have redeemed Class A shares in a Fund
(or Class A shares of another fund of the Smith Barney Mutual Funds
that are sold with a maximum sales charge equal to or greater than
the maximum sales charge of the Fund) and who wish to reinvest their
redemption proceeds in the Fund, provided the reinvestment is made
within 60 calendar days of the redemption;
(f) purchases by accounts managed by registered investment advisory
subsidiaries of Citigroup;
(g) sales through Financial Professionals of Service Agents where the
amounts invested represent the redemption proceeds from other
investment companies, on the condition that (i) the redemption has
occurred no more than 60 days prior to the purchase of the shares,
(ii) the shareholder paid an initial sales charge on such redeemed
shares and (iii) the shares redeemed were not subject to a deferred
sales charge;
(h) direct rollovers by plan participants of distributions from a 401(k)
plan enrolled in the Salomon Smith Barney 401(k) Program (note:
subsequent investments will be subject to the applicable sales
charge);
(i) purchases by separate accounts used to fund certain unregistered
variable annuity contracts; and
(j) purchases by investors participating in a Salomon Smith Barney fee
based arrangement.

PFS may pay its Registered Representatives an amount equal to 0.40% of
the amount invested if the purchase represents redemption proceeds from
an investment company distributed by an entity other than PFS
Investments. In order to obtain such discounts, the purchaser must
provide sufficient information at the time of purchase to permit
verification that the purchase would qualify for the elimination of the
sales charge.

In addition, Class A shares of the Funds may be purchased at net asset
value by the PFS Primerica Corporation Savings and Retirement Plan (the
''Primerica Plan'') for its participants, subject to the provisions of
the Employee Retirement Income Security Act of 1974, as amended
(''ERISA''). Class A shares so purchased are purchased for investment
purposes and may not be resold except by redemption or repurchase by or
on behalf of the Primerica Plan. Class A shares are also offered at net
asset value to accounts opened for shareholders by PFS Investments
Registered Representatives where the amounts invested represent the
redemption proceeds from investment companies distributed by an entity
other than PFS, if such redemption has occurred no more than 60 days
prior to the purchase of shares of the Company, and the shareholder paid
an initial sales charge and was not subject to a deferred sales charge
on the redeemed account. Class A shares are offered at net asset value
to such persons because of anticipated economies in sales efforts and
sales related expenses. The Company may terminate, or amend the terms
of, offering shares of the Company at net asset value to such persons at
any time. PFS may pay PFS Investments Registered Representatives through
whom purchases are made at net asset value an amount equal to 0.40% of
the amount invested if the purchase represents redemption proceeds from
an investment company distributed by an entity other than PFS. Contact
the Sub-Transfer Agent at (800) 544-5445 for further information and
appropriate forms.

OTHER ACCOUNTS

In certain circumstances, the initial sales charge imposed on purchases
of Class A shares through Other Accounts, and the CDSC imposed upon
sales of Class A or Class B shares through Other Accounts, are waived.
Waivers are generally instituted in order to promote good will with
persons or entities with which Citibank or the Distributor or their
affiliates have business relationships, or because the sales effort, if
any, involved in making such sales is negligible, or, in the case of
certain CDSC waivers, because the circumstances surrounding the sale of
Fund shares were not foreseeable or voluntary. These sales charge
waivers may be modified or discontinued at any time.

Class A shares may be purchased through Other Accounts without a sales
charge by:

(a) tax exempt organizations under Section 501(c)(3-13) of the Internal
Revenue Code;
(b) trust accounts for which Citibank, N.A or any subsidiary or affiliate
of Citibank acts as trustee and exercises discretionary investment
management authority;
(c) accounts for which Citibank or any subsidiary or affiliate of
Citibank performs investment advisory services or charges fees for
acting as custodian;
(d) directors or trustees (and their immediate families), and retired
directors and trustees (and their immediate families), of any
investment company for which Citibank or any subsidiary or affiliate
of Citibank serves as the investment adviser or as a service agent;
(e) employees of Citibank and its affiliates, or any Service Agent and
its affiliates (including immediate families of any of the
foregoing), and retired employees of Citibank and its affiliates or
(including immediate families of the foregoing);
(f) investors participating in a fee-based or promotional arrangement
sponsored or advised by Citibank or its affiliates;
(g) investors participating in a rewards program that offers Fund shares
as an investment option based on an investor's balances in selected
Citigroup Inc. products and services;
(h) employees of members of the National Association of Securities
Dealers, Inc., provided that such sales are made upon the assurance
of the purchaser that the purchase is made for investment purposes
and that the securities will not be resold except through redemption
or repurchase;
(i) separate accounts used to fund certain unregistered variable annuity
contracts;
(j) direct rollovers by plan participants from a 401(k) plan offered to
Citigroup employees;
(k) shareholder accounts established through a reorganization or similar
form of business combination approved by a Fund's Board of Trustees
or by the Board of Trustees of any other CitiFund or mutual fund
managed or advised by Citibank (all of such funds being referred to
herein as CitiFunds) the terms of which entitle those shareholders to
purchase shares of a Fund or any other CitiFund at net asset value
without a sales charge;
(l) employee benefit plans qualified under Section 401 of the Internal
Revenue Code, including salary reduction plans qualified under
Section 401(k) of the Code, subject to minimum requirements as may be
established by a distributor with respect to the amount of purchase;
currently, the amount invested by the qualified plan in a Fund or in
any combination of CitiFunds must total a minimum of $1 million;
(m) accounts associated with Copeland Retirement Programs;
(n) investors purchasing $500,000 or more of Class A shares; in
determining whether a contingent deferred sales charge on Class A
shares is payable, see "Deferred Sales Charge Alternatives" below in
this section;
(o) subject to appropriate documentation, investors where the amount
invested represents redemption proceeds from a mutual fund if:

- the redeemed shares were subject to an initial sales charge or a
deferred sales charge (whether or not actually imposed), and

- the redemption has occurred no more than 60 days prior to the
purchase of Class A shares of the Fund;

(p) an investor who has a business relationship with an investment
consultant or other registered representative who joined a broker-
dealer which has a sales agreement with a distributor from another
investment firm within six months prior to the date of purchase by
the investor, if:

- the investor redeems shares of another mutual fund sold through
the investment firm that previously employed that investment
consultant or other registered representative, and either paid an
initial sales charge or was at some time subject to, but did not
actually pay, a deferred sales charge or redemption fee with
respect to the redemption proceeds

- the redemption is made within 60 days prior to the investment in
a Fund, and

- the net asset value of the shares of the Fund sold to that
investor without a sales charge does not exceed the proceeds of
the redemption.

Volume Discounts. The "Amount of Investment'' referred to in the sales
charge table set forth above under "Initial Sales Charge Alternative-
Class A Shares'' includes the purchase of Class A shares in a Fund and,
in the case of PFS Accounts, of certain other Concert and Smith Barney
mutual funds. A person eligible for a volume discount includes: an
individual; members of a family unit comprising a husband, wife and
minor children; a trustee or other fiduciary purchasing for a single
fiduciary account including pension, profit-sharing and other employee
benefit trusts qualified under Section 401(a) of the Code; or multiple
custodial accounts where more than one beneficiary is involved if
purchases are made by salary reduction and/or payroll deduction for
qualified and nonqualified accounts and transmitted by a common employer
entity. Employer entity for payroll deduction accounts may include trade
and craft associations and any other similar organizations.

PFS ACCOUNTS

Cumulative Purchase Discount. The reduced sales load reflected in the
sales charge tables applies to purchases of Class A and Class 1 shares
of the various Funds. An aggregate investment includes all shares of
all of the Funds (and any other eligible funds, as described above),
plus the shares being purchased. The current offering price is used to
determine the value of all such shares. The same reduction is
applicable to purchases under a Letter of Intent as described below.
PFS Investments must notify the Distributor at the time an order is
placed for a purchase which would qualify for the reduced charge on the
basis of previous purchases. Similar notification must be given in
writing when such an order is placed by mail. The reduced sales charge
will not be applied if such notification is not furnished at the time of
the order. The reduced sales charge will also not be applied unless the
records of the Distributor or the Sub-Transfer Agent confirm the
investor's representations concerning his holdings.

OTHER ACCOUNTS

Reduced Sales Charge Plan. A qualified group may purchase shares as a
single purchaser under the reduced sales charge plan. The
purchases by the group are lumped together and the sales charge is based
on the lump sum. A qualified group
must:

(a) have been in existence for more than six months;
(b) have a purpose other than acquiring Fund shares at a discount;
(c) satisfy uniform criteria that enable a distributor to realize
economies of scale in its costs of distributing shares;
(d) have more than ten members;
(e) be available to arrange for group meetings between representatives of
the Funds and the members;
(f) agree to include sales and other materials related to the Funds in
its publications and mailings to members at reduced or no cost to the
distributor; and
(g) seek to arrange for payroll deduction or other bulk transmission of
investments to the Funds.

Letter of Intent. A Letter of Intent for amounts of $50,000 or more
for PFS Accounts, and $25,000 or more for other Accounts, provides an
opportunity for an investor to obtain a reduced sales charge by
aggregating investments over a 13-month period, provided that the
investor refers to such Letter when placing orders. For purposes of a
Letter of Intent, the ''Amount of Investment'' as referred to in the
preceding sales charge table includes purchases of all Class A shares of
each Fund and, in the case of PFS Accounts, other Smith Barney Mutual
Funds, offered with a sales charge over a 13-month period based on the
total amount of intended purchases plus all Class A and Class 1 shares
previously purchased and still owned. An alternative is to compute the
13-month period starting up to 90 days before the date of execution of a
Letter of Intent. Each investment made during the period receives the
reduced sales charge applicable to the total amount of the investment
goal. If the goal is not achieved within the period, the investor must
pay the difference between the sales charges applicable to the purchases
made and the charges previously paid, or an appropriate number of
escrowed shares will be redeemed. Please contact your Service Agent to
obtain a Letter of Intent application.

PFS ACCOUNTS

A Letter of Intent applies to purchases of Class A shares of all Funds
and Class 1 shares of all Funds. When an investor submits a Letter of
Intent to attain an investment goal within a 13-month period, the Sub-
Transfer Agent escrows shares totaling 5% of the dollar amount of the
Letter of Intent in the name of the investor. The Letter of Intent does
not obligate the investor to purchase the indicated amount. In the
event the Letter of Intent goal is not achieved within the 13-month
period, the investor is required to pay the difference between the sales
charge otherwise applicable to the purchases made during this period and
the sales charge actually paid. Such payment may be made directly to
the Service Agent or, if not paid, the Service Agent will liquidate
sufficient escrow shares to obtain such difference. If the goal is
exceeded in an amount which qualifies for a lower sales charge, a price
adjustment is made at the end of the 13-month period by refunding to the
investor the amount of excess sales commissions, if any, paid during the
13-month period.

OTHER ACCOUNTS

Subject to acceptance by CFBDS, Inc., the Funds' distributor, and the
conditions mentioned below, each purchase under a letter of intent will
be made at a public offering price applicable to a single transaction of
the dollar amount specified in the letter of intent.

(a) The shareholder or, if the shareholder is a customer of a Service
Agent, his or her Service Agent must inform a distributor that the
letter of intent is in effect each time shares are purchased;
(b) The shareholder makes no commitment to purchase additional shares,
but if his or her purchases within 13 months plus the value of shares
credited toward completion of the letter of intent do not total the
sum specified, an increased sales charge will apply as described
below;
(c) A purchase not originally made pursuant to a letter of intent may be
included under a subsequent letter of intent executed within 90 days
of the purchase if a distributor is informed in writing of this
intent within the 90-day period;
(d) The value of shares of a Fund presently held, at cost or maximum
offering price (whichever is higher), on the date of the first
purchase under the letter of intent, may be included as a credit
toward the completion of the letter, but the reduced sales charge
applicable to the amount covered by the letter is applied only to new
purchases;
(e) Instructions for issuance of shares in the name of a person other
than the person signing the letter of intent must be accompanied by a
written statement from the Sub-Transfer Agent or a Service Agent
stating that the shares were paid for by the person signing the
letter;
(f) Neither income dividends nor capital gains distributions taken in
additional shares will apply toward the completion of the letter of
intent; and
(g) The value of any shares redeemed or otherwise disposed of by the
purchaser prior to termination or completion of the letter of intent
are deducted from the total purchases made under the letter of
intent.

If the investment specified in the letter of intent is not completed
(either prior to or by the end of the 13-month period), the Sub-Transfer
Agent will redeem, within 20 days of the expiration of the letter of
intent, an appropriate number of the shares in order to realize the
difference between the reduced sales charge that would apply if the
investment under the letter of intent had been completed and the sales
charge that would normally apply to the number of shares actually
purchased. By completing and signing the letter of intent, the
shareholder irrevocably grants a power of attorney to the Sub-Transfer
Agent to redeem any or all shares purchased under the letter of intent,
with full power of substitution.

Deferred Sales Charge Alternatives. CDSC Shares are sold at net asset
value next determined without an initial sales charge so that the full
amount of an investor's purchase payment may be immediately invested in
a Fund. A CDSC, however, may be imposed on certain redemptions of these
shares. "CDSC Shares" are: (i) Class B shares and (ii) Class A shares
that were purchased without an initial sales charge but subject to a
CDSC. Any applicable CDSC will be assessed on an amount equal to the
lesser of the original cost of the shares being redeemed or their net
asset value at the time of redemption. CDSC Shares that are redeemed
will not be subject to a CDSC to the extent that the value of such
shares represents: (a) capital appreciation of Fund assets; (b)
reinvestment of dividends or capital gain distributions; (c) with
respect to Class B shares, shares redeemed more than five years after
their purchase; or (d) with respect to Class A shares that are CDSC
Shares, shares redeemed more than 12 months after their purchase.

Class A shares that are CDSC Shares are subject to a 1.00% CDSC if
redeemed within 12 months of purchase. In circumstances in which the
CDSC is imposed on Class B shares, the amount of the charge will depend
on the number of years since the shareholder made the purchase payment
from which the amount is being redeemed. Solely for purposes of
determining the number of years since a purchase payment, all purchase
payments made during a month will be aggregated and deemed to have been
made on the last day of the preceding statement month. The following
table sets forth the rates of the charge for redemptions of Class B
shares by shareholders.

Years Since Purchase
Payment Was Made

CDSC
Applicable

First
5.00%
Second
4.00
Third
3.00
Fourth
2.00
Fifth
1.00
Sixth and thereafter
0.00

Class B Conversion Feature. Class B shares will convert automatically
to Class A shares eight years after the date on which they were
purchased and thereafter will no longer be subject to any distribution
fees. There will also be converted at that time such proportion of
Class B shares acquired through the reinvestment of dividends and
distributions ("Class B Dividend Shares") owned by the shareholder as
the total number of his or her Class B shares converting at the time
bears to the total number of outstanding Class B shares (other than
Class B Dividend Shares) owned by the shareholder. Because the per
share net asset value of the Class A shares may be higher than that of
the Class B shares at the time of conversion, a shareholder may receive
fewer Class A shares than the number of Class B shares converted,
although the dollar value will be the same.

Class B shares of a Fund purchased in PFS Accounts prior to December 31,
1997 and subsequently redeemed will remain subject to the CDSC at the
rates applicable at the time of purchase.

In determining the applicability of any CDSC or the conversion feature
described above, it will be assumed that a redemption is made first of
shares representing capital appreciation, next of shares representing
the reinvestment of dividends and capital gain distributions and finally
of other shares held by the shareholder for the longest period of time.
The length of time that CDSC Shares acquired through an exchange have
been held will be calculated from the date that the shares exchanged
were initially acquired, and Fund shares being redeemed will be
considered to represent, as applicable, capital appreciation or dividend
and capital gain distribution reinvestments in such other funds. For
Federal income tax purposes, the amount of the CDSC will reduce the gain
or increase the loss, as the case may be, on the amount realized on
redemption.

To provide an example, assume an investor purchased 100 Class B shares
at $10 per share for a cost of $1,000. Subsequently, the investor
acquired 5 additional shares through dividend reinvestment. During the
fifteenth month after the purchase, the investor decided to redeem $500
of his or her investment. Assuming at the time of the redemption the net
asset value had appreciated to $12 per share, the value of the
investor's shares would be $1,260 (105 shares at $12 per share). The
CDSC would not be applied to the amount that represents appreciation
($200) and the value of the reinvested dividend shares ($60). Therefore,
$240 of the $500 redemption proceeds ($500 minus $260) would be charged
at a rate of 4.00% (the applicable rate for Class B shares) for a total
deferred sales charge of $9.60.

For the year ended October 31, 1999, CDSCs paid for Class B shares were
approximately:

Fund CDSC

Large CapGrowth: $767,965
Growth and Income: $639,210
International: $68,326

Waiver of CDSC.

PFS ACCOUNTS

For PFS Accounts, the CDSC generally is waived on exchanges and on
redemptions of Class A and Class B shares in the circumstances described
below:

(a) Redemption Upon Disability or Death

The Company may waive the CDSC on redemptions following the death or
disability of a Class A or Class B shareholder. An individual will be
considered disabled for this purpose if he or she meets the definition
thereof in Section 72(m)(7) of the Code, which in pertinent part defines
a person as disabled if such person "is unable to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death
or to be of long-continued and indefinite duration." While the Company
does not specifically adopt the balance of the Code's definition which
pertains to furnishing the Secretary of Treasury with such proof as he
or she may require, the Sub-Transfer Agent will require satisfactory
proof of death or disability before it determines to waive the CDSC.

In cases of disability or death, the CDSC may be waived where the
decedent or disabled person is either an individual shareholder or owns
the shares as a joint tenant with right of survivorship or is the
beneficial owner of a custodial or fiduciary account, and where the
redemption is made within one year of the death or initial determination
of disability. This waiver of the CDSC applies to a total or partial
redemption, but only to redemptions of shares held at the time of the
death or initial determination of disability.

(b) Redemption in Connection with Certain Distributions from Retirement
Plans

The Company may waive the CDSC when a total or partial redemption is
made in connection with certain distributions from Retirement Plans.
The charge may be waived upon the tax-free rollover or transfer of
assets to another Retirement Plan invested in one or more of the Funds;
in such event, as described below, the Fund will "tack" the period for
which the original shares were held on to the holding period of the
shares acquired in the transfer or rollover for purposes of determining
what, if any, CDSC is applicable in the event that such acquired shares
are redeemed following the transfer or rollover. The charge also may be
waived on any redemption which results from the return of an excess
contribution pursuant to Section 408(d)(4) or (5) of the Code, the
return of excess deferral amounts pursuant to Code Section 401(k)(8) or
402(g)(2), or from the death or disability of the employee (see Code
Section 72(m)(7) and 72(t)(2)(A)(ii)). In addition, the charge may be
waived on any minimum distribution required to be distributed in
accordance with Code Section 401(a)(9).

The Company does not intend to waive the CDSC for any distributions from
IRAs or other Retirement Plans not specifically described above.

A shareholder may elect to participate in a systematic withdrawal plan
("Plan") with respect to the shareholder's investment in a Fund. Under
the Plan, a dollar amount of a participating shareholder's investment in
the Fund will be redeemed systematically by the Fund on a periodic
basis, and the proceeds mailed to the shareholder. The amount to be
redeemed and frequency of the systematic withdrawals will be specified
by the shareholder upon his or her election to participate in the Plan.
The CDSC may be waived on redemptions made under the Plan.

The amount of the shareholder's investment in a Fund at the time the
election to participate in the Plan is made with respect to the Fund is
hereinafter referred to as the "initial account balance." The amount to
be systematically redeemed from such Fund without the imposition of a
CDSC may not exceed a maximum of 12% annually of the shareholder's
initial account balance. The Company reserves the right to change the
terms and conditions of the Plan and the ability to offer the Plan.

(d) Involuntary Redemptions of Shares in Accounts that Do Not Have the
Required Minimum Balance

The Company reserves the right to redeem shareholder accounts with
balances of less than a specified dollar amount as set forth in the
Prospectus. Prior to such redemptions, shareholders will be notified in
writing and allowed a specified period of time to purchase additional
shares to bring the account up to the required minimum balance. Any
involuntary redemption may only occur if the shareholder account is less
than the amount specified in the Prospectus due to shareholder
redemptions. The Company may waive the CDSC upon such involuntary
redemption.

(e) Redemption by manager

The Company may waive the CDSC when a total or partial redemption is
made by the manager with respect to its investments in a Fund.

OTHER ACCOUNTS

See "Initial Sales Charge Waivers-Other Accounts". There is no CDSC on
shares representing capital appreciation or on shares acquired through
reinvestment of dividends or capital gains distributions.

The CDSC will be waived for Other Accounts in connection with:

(a) a total or partial redemption made within one year of the death of
the shareholder; this waiver is available where the deceased
shareholder is either the sole shareholder or owns the shares with
his or her spouse as a joint tenant with right of survivorship, and
applies only to redemption of shares held at the time of death;
(b) a lump sum or other distribution in the case of an Individual
Retirement Account (IRA), a self-employed individual retirement plan
(Keogh Plan) or a custodian account under Section 403(b) of the
Internal Revenue Code, in each case following attainment of age 59 1/2;
(c) a total or partial redemption resulting from any distribution
following retirement in the case of a tax-qualified retirement plan;
(d) a redemption resulting from a tax-free return of an excess
contribution to an IRA; and
(e) redemptions made under a Fund's Systematic Withdrawal Plan.

Purchases of Class 1 Shares. Class 1 shares are offered only through
PFS Accounts, and only to Eligible Class 1 Purchasers, at the next
determined net asset value plus a sales charge, as set forth below.

Size of Investment

As % of
Net Amount
Invested

As % of
Offering
Price
Reallowed to
PFS
(as a % of
Offering
Price)*
Less than $10,000
9.29%
8.50%
7.00%
$ 10,000 but less than
$ 25,000
8.40%
7.75%
6.25%
$ 25,000 but less than
$ 50,000
6.38%
6.00%
5.00%
$ 50,000 but less than
$ 100,000
4.71%
4.50%
3.75%
$ 100,000 but less than
$ 250,000
3.63%
3.50%
3.00%
$ 250,000 but less than
$ 400,000
2.56%
2.50%
2.00%
$ 400,000 but less than
$ 600,000
2.04%
2.00%
1.60%
$ 600,000 but less than
$5,000,000
1.01%
1.00%
0.75%
$5,000,000 or more
0.25%
0.25%
0.20%

* Additionally, PFS Distributors, Inc. pays to PFS Investments a
promotional fee calculated as a percentage of the sales charge reallowed
to PFS. The percentage used in the calculation is 3%.

The Distributor may be deemed to be an underwriter for purposes of the
Securities Act of 1933. From time to time, Service Agents or their
affiliates may also pay for certain non-cash sales incentives provided
to financial professionals. Such incentives do not have any effect on
the net amount invested. In addition to the reallowances from the
applicable public offering price described above, Service Agents may,
from time to time, pay or allow additional reallowances or promotional
incentives, in the form of cash or other compensation to financial
professionals that sell shares of the Company.

Class 1 shares may be purchased at net asset value by the Primerica Plan
for Eligible Class 1 Purchasers participating in the Primerica Plan,
subject to the provisions of ERISA. Shares so purchased are purchased
for investment purposes and may not be resold except by redemption or
repurchase by or on behalf of the Primerica Plan. Class 1 Shares are
also offered at net asset value to accounts opened for shareholders by
PFS Investments Registered Representatives where the amounts invested
represent the redemption proceeds from investment companies distributed
by an entity other than the Distributor, if such redemption has occurred
no more than 60 days prior to the purchase of shares of the Company and
the shareholder paid an initial sales charge and was not subject to a
deferred sales charge on the redeemed account. Shares are offered at net
asset value to such persons because of anticipated economies in sales
efforts and sales related expenses. The Company may terminate, or amend
the terms of, offering shares of the Company at net asset value to such
persons at any time. PFS may pay PFS Investment Registered
Representatives through whom purchases are made at net asset value an
amount equal to 0.40% of the amount invested if the purchase represents
redemption proceeds from an investment company distributed by an entity
other than the Distributor. Contact the Sub-Transfer Agent at (800) 544-
5445 for further information and appropriate forms.

Investors purchasing Class 1 shares may under certain circumstances be
entitled to reduced sales charges. The circumstances under which such
investors may pay reduced sales charges are the same as those described
above under ''Purchases of Shares-''Volume Discounts'' and ''Letter of
Intent.''

Class L Shares Class L shares are sold with an initial sales charge of
1.00% (which is equal to 1.01% of the amount invested) and are subject
to a deferred sales charge payable upon certain redemptions. See
"Deferred Sales Charge Provisions" below.

Class Y Shares Class Y shares are sold without an initial sales charge
or deferred sales charge and are available only to investors investing a
minimum of $15,000,000.

EXCHANGE PRIVILEGE

Exchange privilege - General.

Class A Exchanges. Class A shareholders of each Fund who wish to
exchange all or a portion of their shares for Class A shares in any
funds eligible for the exchange privilege may do so without imposition
of any charge.

Class B Exchanges. In the event a Class B shareholder wishes to
exchange all or a portion of his or her shares into any of the funds
imposing a higher CDSC than that imposed by the Fund then owned, the
exchanged Class B shares will be subject to the higher applicable CDSC.
Upon an exchange, the new Class B shares will be deemed to have been
purchased on the same date as the Class B shares of the Fund that have
been exchanged.

PFS ACCOUNTS

For PFS Accounts, shares of each class of a Fund may be exchanged at the
net asset value next determined for shares of the same class in the
other Funds of the Company and in the following funds, to the extent
shares are offered for sale in the shareholder's state of residence.
Exchanges of Class 1 shares into a fund that does not offer Class 1
shares may be made for Class A shares of such fund. Exchanges are
subject to minimum investment requirements and all shares are subject to
the other requirements of the fund into which exchanges are made.

- Concert Peachtree Growth Fund

- Concert Social Awareness Fund

- Smith Barney Appreciation Fund Inc.

- Smith Barney Concert Allocation Series Inc.-Balanced Portfolio

- Smith Barney Concert Allocation Series Inc.-Conservative Portfolio

- Smith Barney Concert Allocation Series Inc.- Growth Portfolio

- Smith Barney Concert Allocation Series Inc.-High Growth Portfolio

- Smith Barney Concert Allocation Series Inc.-Income Portfolio

- Smith Barney Investment Grade Bond Fund

- *Smith Barney Money Funds, Inc.-Cash Portfolio

- **Smith Barney Exchange Reserve Fund

* Available for exchange with Class A shares of a Fund.
** Available for exchange with Class B shares of a Fund.

Shareholders who establish telephone transaction authorization on their
account may request an exchange by telephone. If a shareholder does not
wish to allow telephone exchanges by any person in his account, he
should decline the telephone transaction option on the account
application. Redemption procedures discussed below are also applicable
for exchanging shares, and exchanges will be made upon receipt of all
supporting documents in proper form. Exchanges between funds involving
exact registrations do not require a signature guarantee.

OTHER ACCOUNTS

For Other Accounts, Class A and Class B shares of a Fund may be
exchanged for shares of the same class in any other Fund of the Company,
or for shares of the same class of CitiFunds Cash Reserves.

Additional Information Regarding the Exchange Privilege. Although the
exchange privilege is an important benefit, excessive exchange
transactions can be detrimental to a Fund's performance and its
shareholders. The Company may determine that a pattern of frequent
exchanges is excessive and contrary to the best interests of each Fund's
other shareholders. In this event, the Company may, at its discretion,
decide to limit additional purchases and/or exchanges by the
shareholder. Upon such a determination by the Company, the Company will
provide notice in writing or by telephone to the shareholder at least 15
days prior to suspending the exchange privilege and during the 15 day
period the shareholder will be required to (a) redeem his or her shares
in the Fund or (b) remain invested in the Fund or exchange into any of
the other funds eligible for the exchange privilege, and the shareholder
would be expected to maintain such investment for a significant period
of time. All relevant factors will be considered in determining what
constitutes an abusive pattern of exchanges.

By use of the exchange privilege, the investor authorizes the Sub-
Transfer Agent to act on written exchange instructions from any person
representing himself to be the investor or the agent of the investor and
believed by the Sub-Transfer Agent to be genuine. The Sub-Transfer
Agent's records of such instructions are binding.

For purposes of determining the sales charge rate previously paid on
Class A (and for PFS Accounts, Class 1 shares) of a Fund, all sales
charges paid on the exchanged security and on any security previously
exchanged for such security or for any of its predecessors shall be
included. If the exchanged security was acquired through reinvestment,
that security is deemed to have been sold with a sales charge rate equal
to the rate previously paid on the security on which the dividend or
distribution was paid. If a shareholder exchanges less than all of his
securities, the security upon which the highest sales charge rate was
previously paid is deemed exchanged first.

Exchange requests received on a business day prior to the time shares of
a Fund involved in the request are priced will be processed on the date
of receipt. "Processing" a request means that shares in a fund from
which the shareholder is withdrawing an investment will be redeemed at
the net asset value per share next determined on the date of receipt.
Shares of the new fund into which the shareholder is investing will also
normally be purchased at the net asset value per share next determined
on the date of receipt. Exchange requests received on a business day
after the time shares of the Funds involved in the request are priced
will be processed on the next business day in the manner described
above.

Redemption procedures discussed below are also applicable for exchanging
shares, and exchanges will be made upon receipt of all supporting
documents in proper form. If the account registration of the shares of
the fund being acquired is identical to the registration of the shares
of the fund exchanged, no signature guarantee is required. An exchange
involves a redemption of shares, which is a taxable transaction. Before
exchanging shares, investors should read the current prospectus
describing the shares to be acquired. Each Fund reserves the right to
modify or discontinue exchange privileges upon 60 days' prior notice to
shareholders.

REDEMPTION OF SHARES

Redemption-General. In all cases, the redemption price is the net asset
value per share of the Fund next determined after the request for
redemption is received in proper form by the Sub-Transfer Agent (in the
case of PFS Accounts, the Sub-Transfer Agent). Payment for shares
redeemed will be made by check mailed within three days after acceptance
by the Sub-Transfer Agent (in the case of PFS Accounts, the Sub-Transfer
Agent) of the request and any other necessary documents in proper order.
Such payment may be postponed or the right of redemption suspended as
provided by the rules of the SEC. If the shares to be redeemed have
been recently purchased by check or draft, the Sub-Transfer Agent (in
the case of PFS Accounts, the Sub-Transfer Agent) may hold the payment
of the proceeds until the purchase check or draft has cleared, usually a
period of up to 15 days. A redemption of shares is a taxable
transaction for the shareholder.

The Company may suspend the right of redemption or postpone the date of
payment for shares of a Fund more than seven days during any period when
(a) trading in the markets a Fund normally utilizes is restricted, or an
emergency, as defined by the rules and regulations of the SEC exists
making disposal of the Fund's investments or determination of its net
asset value not reasonably practicable; (b) the New York Stock Exchange
is closed (other than customary weekend and holiday closings); or (c)
the SEC has by order permitted such suspension.

PFS ACCOUNTS

Shareholders may redeem for cash some or all of their shares of a Fund
at any time by sending a written request in proper form directly to the
Sub-Transfer Agent, PFS Shareholder Services, at 3100 Breckinridge Blvd,
Bldg. 200, Duluth, Georgia 30099-0062. If you should have any questions
concerning how to redeem your account after reviewing the information
below, please contact the Sub-Transfer Agent at (800) 544-5445, Spanish-
speaking representatives (800) 544-7278 or TDD Line for the Hearing
Impaired (800) 824-1721.

The request for redemption must be signed by all persons in whose names
the shares are registered. Signatures must conform exactly to the
account registration. If the proceeds of the redemption exceed $50,000,
or if the proceeds are not paid to the record owner(s) at the record
address, if the shareholder(s) has had an address change in the past 45
days, or if the shareholder(s) is a corporation, sole proprietor,
partnership, Company or fiduciary, signature(s) must be guaranteed by
one of the following: a bank or trust company; a broker-dealer; a credit
union; a national securities exchange, registered securities association
or clearing agency; a savings and loan association; or a federal savings
bank.

Generally, a properly completed Redemption Form with any required
signature guarantee is all that is required for a redemption. In some
cases, however, other documents may be necessary. For example, in the
case of shareholders holding certificates, the certificates for the
shares being redeemed must accompany the redemption request. Additional
documentary evidence of authority is also required by the Sub-Transfer
Agent in the event redemption is requested by a corporation,
partnership, trust, fiduciary, executor or administrator. Additionally,
if a shareholder requests a redemption from a Retirement Plan account
(IRA, SEP or 403(b)(7)), such request must state whether or not federal
income tax is to be withheld from the proceeds of the redemption check.

A shareholder may utilize the Sub-Transfer Agent's Telephone Redemption
service to redeem his or her account as long as they have authorized the
telephone redemption option. If a shareholder does not wish to allow
telephone redemptions by any person in his account, he should decline
the telephone transaction option on the account application. The
telephone redemption option can be used only if: (a) the redemption
proceeds are to be mailed to the address of record and there has been no
change of address of record within the preceding 45 days; (b) the shares
to be redeemed are not in certificate form; (c); the person requesting
the redemption can provide proper identification information; and (d)
the proceeds of the redemption do not exceed $50,000. 403(b)(7)
accounts and accounts not registered in the name of individual(s) are
not eligible for the telephone redemption option. Telephone redemption
requests can be made by contacting the Sub-Transfer Agent at (800) 544-
5445 between 9:00 a.m. and 6:00 p.m. eastern time any day that the NYSE
is open. Telephone redemption may not be available if the shareholder
cannot reach the Sub-Transfer Agent whether because all telephone lines
are busy or for any other reason; in such case, a shareholder would have
to use the Fund's regular redemption procedure described above.

A shareholder may utilize the Sub-Transfer Agent's FAX to redeem the
shareholder's account as long as a signature guarantee or other
documentary evidence is not required. Redemption requests should be
properly signed by all owners of the account and faxed to the Sub-
Transfer Agent at (800) 554-2374. Facsimile redemptions may not be
available if the shareholder cannot reach the Sub-Transfer Agent by FAX,
whether because all telephone lines are busy or for any other reason; in
such case, a shareholder would have to use the Fund's regular redemption
procedure described above. Facsimile redemptions received by the Sub-
Transfer Agent prior to 4:00 p.m. Eastern time on a regular business day
will be processed at the net asset value per share determined that day.

After following the redemption guidelines stated in the Prospectus and
SAI, a shareholder may elect to have the redemption proceeds transferred
via Wire or ACH directly to the shareholder's bank account of record
(defined as a currently established pre-authorized draft on the
shareholder's account included with the application or with no changes
within the previous 30 days) as long as the bank account is registered
in the same name(s) as the account with the Fund. Redemption proceeds
can be sent by check to the address of record or by wire transfer to a
bank account designated on the application. A shareholder will be
charged a $25 service fee for wire transfers and a nominal service fee
for transfers made directly to the shareholder's bank by the Automated
Clearing House (ACH). If the proceeds are not to be transferred to the
bank account of record or mailed to the registered owner, the request
must be submitted in writing and a signature guarantee will be required
from all shareholders. Redemption proceeds will normally be sent to the
designated bank account on the next business day following the
redemption, and should ordinarily be credited to the shareholder's bank
account by his/her bank within 48 to 72 hours for wire transfers and 72
to 96 hours for ACH transfers.

OTHER ACCOUNTS

Shareholders may redeem or exchange Fund shares by telephone, if their
account applications so permit, by calling the Sub-Transfer Agent or, if
they are customers of a Service Agent, their Service Agent. During
periods of drastic economic or market changes or severe weather or other
emergencies, shareholders may experience difficulties implementing a
telephone exchange or redemption. In such an event, another method of
instruction, such as a written request sent via an overnight delivery
service, should be considered. The Fund, the sub-transfer agent and each
Service Agent will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. These procedures may
include recording of the telephone instructions and verification of a
caller's identity by asking for his or her name, address, telephone,
Social Security number, and account number. If these or other reasonable
procedures are not followed, the Fund, the sub-transfer agent or the
Service Agent may be liable for any losses to a shareholder due to
unauthorized or fraudulent instructions. Otherwise, the shareholder will
bear all risk of loss relating to a redemption or exchange by telephone.

Automatic Cash Withdrawal Plan. Each Fund offers shareholders an
automatic cash withdrawal plan, under which shareholders who own shares
with a value of at least $10,000 may elect to receive cash payments of a
specified amount.

PFS ACCOUNTS

For PFS Accounts, the amount of each withdrawal must be at least $50
monthly or quarterly. Retirement plan accounts are eligible for
automatic cash withdrawal plans only where the shareholder is eligible
to receive qualified distributions and has an account value of at least
$5,000. The withdrawal plan will be carried over on exchanges between
funds or Classes of a Fund. The Company reserves the right to
involuntarily liquidate any shareholder's account in a Fund if the
aggregate net asset value of the shares held in that Fund account is
less than $500. (If a shareholder has more than one account in a Fund,
each account must satisfy the minimum account size.) The Company,
however, will not redeem shares based solely on market reductions in net
asset value. Before the Company exercises such right, shareholders will
receive written notice and will be permitted 60 days to bring accounts
up to the minimum to avoid involuntary liquidation. Any applicable CDSC
will not be waived on amounts withdrawn by a shareholder that exceed
1.00% per month of the value of the shareholder's shares subject to the
CDSC at the time the withdrawal plan commences. For further information
regarding the automatic cash withdrawal plan, shareholders should
contact the Sub-Transfer Agent.

OTHER ACCOUNTS

For shareholders who hold shares through Other Accounts, there is a
limit of one withdrawal per month under the plan.

If you redeem Class A or Class B shares under the plan that are subject
to a CDSC, you are not subject to any CDSC applicable to the shares
redeemed, but the maximum amount that you can redeem under the Plan in
any year is limited to 10% of the average daily balance in your account.
You may receive your withdrawals by check, or have the monies
transferred directly into your bank account. Or you may direct that
payments be made directly to a third party. To participate in the plan,
you must complete the appropriate forms provided by your Service Agent.

Additional Purchase and Sale Information.

PFS ACCOUNTS

Neither the Series or its agents will be liable for following
instructions communicated by telephone that are reasonably believed to
be genuine. The Series reserves the right to suspend, modify or
discontinue the telephone redemption and exchange program or to impose a
charge for this service at any time following at least seven (7) days
prior notice to shareholders.

Check Writing Privilege. This option is available for non-retirement plan
accounts that are not subject to a contingent deferred sales charge in the
Concert Investment Series(r) Government Fund, Concert Investment Series(r)
Municipal Bond Fund (A Shares and Class 1 Shares only). Checks must be
written for at least $250. Each book of 10 check costs $7.50 which will
be deducted form your account balance.

OTHER ACCOUNTS

Each Service Agent has agreed to transmit to its customers who are
shareholders of a Fund appropriate prior written disclosure of any fees
that it may charge them directly. Each Service Agent is responsible for
transmitting promptly orders of its customers.

Investors may be able to establish new accounts in the Funds under one
of several tax-sheltered plans. Such plans include IRAs, Keogh or
Corporate Profit-Sharing and Money-Purchase Plans, 403(b) Custodian
Accounts, and certain other qualified pension and profit-sharing plans.
Investors should consult with their Service Agent and their tax and
retirement advisers.

Shareholders may redeem or exchange Fund shares by telephone, if their
account applications so permit, by calling the sub-transfer agent or, if
they are customers of a Service Agent, their Service Agent. During
periods of drastic economic or market changes or severe weather or other
emergencies, shareholders may experience difficulties implementing a
telephone exchange or redemption. In such an event, another method of
instruction, such as a written request sent via an overnight delivery
service, should be considered. The Funds, the sub-transfer agent and
each Service Agent will employ reasonable procedures to confirm that
instructions communicated
by telephone are genuine. These procedures may include recording of the
telephone instructions and verification of a caller's identity by asking
for his or her name, address, telephone, Social Security number, and
account number. If these or other reasonable procedures are not
followed, the Funds, the sub-transfer agent or the Service Agent may be
liable for any losses to a shareholder due to unauthorized or fraudulent
instructions. Otherwise, the shareholder will bear all risk of loss
relating to a redemption or exchange by telephone.

DISTRIBUTIONS AND FEDERAL TAXES

International Fund and Large Cap Fund distribute dividends and capital
gains annually; Growth and Income Fund declares and pays dividends
quarterly. The per share dividends on Class B shares of each Fund will
be lower than the per share dividends on Class A and Class 1 shares as a
result of the distribution fees and incremental transfer agency fees, if
any, applicable to the Class B shares. Each Fund intends similarly to
distribute to shareholders any taxable net realized capital gains (the
excess of net long-term capital gain over net short-term capital loss).
Taxable net realized capital gains are the excess, if any, of the
Fund's total profits on the sale of securities and certain other
transactions during the year over its total losses on such sales and
transactions, including capital losses carried forward from prior years
in accordance with the tax laws. Such capital gains, if any, are
distributed at least once a year. All income dividends and capital
gains distributions are reinvested in shares of a Fund at net asset
value without sales charge on the record date, except that any
shareholder may otherwise instruct the shareholder service agent in
writing and receive cash. Shareholders are informed as to the sources
of distributions at the time of payment.

Each Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Code by complying with certain requirements
regarding the sources and distribution of its income and the
diversification of its assets. By so qualifying, a Fund will not be
subject to federal income tax on amounts paid by it as dividends and
distributions to shareholders in compliance with the Code's timing and
other requirements. If any Fund were to fail to qualify as a regulated
investment company under the Code, all of its income (without deduction
for income dividends or capital gain distributions paid to shareholders)
would be subject to tax at corporate rates. A Fund will be subject to a
nondeductible, 4% federal excise tax if it fails to meet certain
distribution requirements with respect to each calendar year, generally
applicable to its ordinary (taxable) income for that year and the excess
of its capital gains over its capital losses for the one-year period
ended on October 31 of that year. The Funds intend generally to make
distributions sufficient to avoid or minimize any liability for the
excise tax. Each Fund expects to be treated as a separate entity for
purposes of determining its federal tax treatment.

Dividends from net investment income and any excess of net short-term
capital gain over net long-term capital loss are taxable to shareholders
as ordinary income. A portion of dividends taxable as ordinary income
paid by Small Cap Fund, International Fund, Mid Cap Fund, Growth Fund
and Growth and Income Fund may qualify for the 70% dividends received
deduction for corporations. Qualifying dividends include only dividends
attributable to dividends a Fund receives from U.S. domestic
corporations with respect to stock for which the Fund satisfies
applicable holding period requirements.

The portion of the dividends received from a Fund which qualifies for
the dividends-received deduction for corporations will be reduced to the
extent that the Fund holds dividend-paying stock for less than 46 days
(91 days for certain preferred stock). The Fund's holding period
requirement must be satisfied separately for each dividend during a
prescribed period before and after the ex-dividend date and will not
include any period during which the Fund has reduced its risk of loss
from holding the stock by purchasing an option to sell, granting an
option to buy, or entering into a short sale of substantially identical
stock or securities, such as securities convertible into the stock. The
holding period for stock may also be reduced if the Fund diminishes its
risk of loss by holding one or more positions in substantially similar
or related property. The dividends-received deduction will be allowed
only with respect to dividends on Fund shares for which a corporate
shareholder satisfies the same holding period rules applicable to the
Fund.

Receipt of dividends that qualify for the dividends-received reduction
may increase a corporate shareholder's liability, if any, for the
alternative minimum tax. Such a shareholder should also consult its tax
adviser regarding the possibility that its federal tax basis in its Fund
shares may be reduced by the receipt of "extraordinary dividends" from
the Fund and, to the extent such basis would be reduced below zero,
current recognition of income would be required.

For federal income tax purposes, dividends declared by a Fund in
October, November or December as of a record date in such a month and
which are actually paid in January of the following year will be treated
as if they were paid on December 31 of the year in which they are
declared. These dividends will be taxable to shareholders as if actually
received on December 31 rather than in the year in which shareholders
actually receive the dividends.

A capital gain dividend (i.e., a dividend from the excess of a Fund's
net long-term capital gain over its net short-term capital loss)
received after the purchase of the shares of any of the Funds reduces
the net asset value of the shares by the amount of the distribution and
will nevertheless be subject to income taxes. The same is true of
dividends treated as ordinary income, as described above. Investors may
therefore wish to avoid purchasing Fund shares shortly before an
anticipated dividend (other than an exempt-interest dividend from
Municipal Bond Fund) or capital gain dividend in order to avoid being
taxed on a distribution that is economically a return of a portion of
the purchase price. These capital gain dividends are taxable to
shareholders as long-term capital gains, regardless of how long the
shareholder has held Fund shares. Any loss on the sale of Fund shares
held for six months or less is treated as a long-term capital loss to
the extent of any capital gain dividend paid on such shares. All
dividends and distributions are taxable to the shareholder in the same
manner whether or not reinvested in shares. Shareholders are notified
annually by the Fund as to the federal tax status of dividends and
distributions paid by the Fund.

If shares of a Fund purchased subject to a sales charge are sold or
exchanged within 90 days of acquisition, and shares of the same or
another mutual fund are acquired, to the extent the sales charge on the
initial purchase is reduced or waived on the subsequent acquisition, the
sales charge may not be used to determine the basis in the disposed
shares for purposes of determining gain or loss. To the extent the sales
charge is not allowed in determining gain or loss on the initial shares,
it is capitalized in the basis of the subsequent shares. Additionally,
any loss realized on a redemption or exchange of Fund shares may be
disallowed under "wash sale" rules to the extent the shares disposed of
are replaced with other shares of the same Fund within a period of 61
days, beginning 30 days before and ending 30 days after such
disposition, such as pursuant to reinvestment of dividends in Fund
shares.

Periodic withdrawals under the systematic withdrawal plan involve
redemptions of shares, which may result in tax liability for the
redeeming shareholder. Additionally, any redemption of shares is a
potentially taxable transaction, even if a reinvestment privilege is
later exercised.

Dividends to shareholders who are non-resident aliens may be subject to
a United States withholding tax at a rate of up to 30% under existing
provisions of the Code applicable to foreign individuals and entities
unless a reduced rate of withholding or a withholding exemption is
provided under applicable treaty laws. Non-resident shareholders are
urged to consult their own tax advisers concerning the applicability of
the United States withholding tax.

Dividends and capital gains distributions may also be subject to state
and local taxes. Shareholders are urged to consult their attorneys or
tax advisers regarding specific questions as to federal, state or local
taxes.

Back-up Withholding. Each Fund is required to withhold and remit to the
United States Treasury 31% of (i) reportable taxable dividends and
distributions and (ii) the proceeds of any redemptions of Fund shares
with respect to any shareholder who is not exempt from withholding and
who fails to furnish the Fund with a correct taxpayer identification
number, who fails to report fully dividend or interest income or who
fails to certify to the Company that he has provided a correct taxpayer
identification number and that he is not subject to withholding. (An
individual's taxpayer identification number is his or her social
security number.) The 31% "Back-up withholding tax" is not an additional
tax and may be credited against a taxpayer's regular federal income tax
liability.

The Code includes special rules applicable to certain listed options
(excluding equity options as defined in the Code), futures contracts,
and options on futures contracts which a Fund may write, purchase or
sell. Such options and contracts are generally classified as
Section 1256 contracts under the Code. The character of gain or loss
resulting from the sale, disposition, closing out, expiration or other
termination of Section 1256 contracts is generally treated as long-term
capital gain or loss to the extent of 60 percent thereof and short-term
capital gain or loss to the extent of 40 percent thereof ("60/40 gain or
loss"). Such contracts, when held by the Fund at the end of a fiscal
year, generally are required to be treated as sold at market value on
the last day of such fiscal year for federal income tax purposes
("marked-to-market"). Over-the-counter options, equity options, and
certain other options or future contracts are not classified as
Section 1256 contracts and are not subject to the mark-to-market rule or
to 60/40 gain or loss treatment. Any gains or losses from transactions
in over-the-counter options generally constitute short-term capital
gains or losses. If over-the-counter call options written, or
over-the-counter put options purchased, by a Fund are exercised, the
gain or loss realized on the sale of the underlying securities may be
either short-term or long-term, depending on the holding period of the
securities. In determining the amount of gain or loss, the sales
proceeds are reduced by the premium paid for over-the-counter puts or
increased by the premium received for over-the-counter calls.

Certain transactions in options, futures contracts, or options on
futures contracts may constitute "straddles" which are defined in the
Code as offsetting positions with respect to personal property. A
straddle in which at least one (but not all) of the positions are
Section 1256 contracts is a "mixed straddle" under the Code if certain
conditions are met.

The Code generally provides with respect to straddles (i) "loss
deferral" rules which may postpone recognition for tax purposes of
losses from certain closing purchase transactions or other dispositions
of a position in the straddle to the extent of unrealized gains in the
offsetting position, (ii) "wash sale" rules which may postpone
recognition for tax purposes of losses where a position is sold and a
new offsetting position is acquired within a prescribed period and
(iii) "short sale" rules which may terminate the holding period of
securities owned by the Fund when offsetting positions are established
and which may convert certain losses from short-term to long-term.

The Code provides that certain elections may be made for mixed straddles
that can alter the character of the capital gain or loss recognized upon
disposition of positions which form part of a straddle. Certain other
elections are also provided in the Code. No determination has been
reached to make any of these elections.

The effect of the tax rules described above with respect to options and
futures contracts may be to change the amount, timing and character of a
Fund's income, gains and losses and therefore of its distributions to
shareholders.

These rules also generally apply to options, futures and forward
contracts relating to foreign currency, except that (1) options, futures
and forward contracts on certain foreign currencies are not governed by
Section 1256, (2) gains and losses on foreign currency forward contracts
are generally treated as ordinary income and losses, and (3) gains and
losses on a Fund's foreign currency options and futures contracts that
are not governed by Section 1256, if any, are generally treated as
ordinary income and loss.

Additionally, under the Code gains or losses attributable to
fluctuations in exchange rates between the time a Fund accrues income or
receivables or expenses or other liabilities denominated in a foreign
currency and the time the Fund actually collects such income or pays
such liabilities, are treated as ordinary income or ordinary loss.
Similarly, gains or losses on the disposition of debt securities
denominated in foreign currency, to the extent attributable to
fluctuations in exchange rates between the acquisition and disposition
dates, are treated as ordinary income or loss.

If a Fund purchases shares in certain foreign investment entities,
referred to as "passive foreign investment companies," the Fund itself
may be subject to U.S. federal income tax and an additional charge in
the nature of interest on a portion of any "excess distribution" from
such company or gain from the disposition of such shares, even if the
distribution or gain is distributed by the Fund to its shareholders in a
manner that satisfies the distribution requirements referred to above.
If a Fund were able and elected to treat a passive foreign investment
company as a "qualified electing fund," in lieu of the treatment
described above, the Fund would be required each year to include in
income, and distribute to shareholders in accordance with the
distribution requirements described above, the Fund's pro rata share of
the ordinary earnings and net capital gains of the company, whether or
not actually received by the Fund. A Fund generally should be able to
make an alternative election to mark these investments to market
annually, resulting in the recognition of ordinary income (rather than
capital gain) or ordinary loss, subject to limitations on the ability to
use any such loss.

A Fund may be required to treat amounts as taxable income or gain,
subject to the distribution requirements referred to above, even though
no corresponding amounts of cash are received concurrently, as a result
of (1) mark to market, constructive sale or other rules applicable to
passive foreign investment companies, partnerships or trusts in which
the Fund invests or to certain options, futures, forward contracts, or
"appreciated financial positions" or (2) the inability to obtain cash
distributions or other amounts due to currency controls or restrictions
on repatriation imposed by a foreign country with respect to the Fund's
investments in issuers in such country or (3) tax rules applicable to
debt obligations acquired with "original issue discount," including
zero-coupon or deferred payment bonds and pay-in-kind debt obligations,
or to market discount if an election is made with respect to such market
discount. A Fund may therefore be required to obtain cash to be used to
satisfy these distribution requirements by selling portfolio securities
at times that it might not otherwise be desirable to do so or borrowing
the necessary cash, thereby incurring interest expenses.

Dividends or other income (including, in some cases, capital gains)
received by a Fund from sources within foreign countries may be subject
to withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States may reduce
or eliminate such taxes in some cases. If eligible, the International
Fund will determine whether to make an election to treat any qualified
foreign income taxes paid by it as paid by its shareholders. In
determining whether to make this election, the Fund will take into
consideration such factors as the amount of foreign taxes paid and the
administrative costs associated with making the election. If the
election is made, shareholders of the Fund would be required to include
their respective pro rata portions of such qualified foreign taxes in
computing their taxable income and would then generally be entitled to
credit such amounts against their United States federal income taxes
due, if any, provided that certain holding period requirements are
satisfied, or to include such amounts in their itemized deductions, if
any. For any year for which it makes such an election, the
International Fund will report to its shareholders (shortly after the
close of its fiscal year) the amount per share of such foreign taxes
that must be included in the shareholder's gross income and will be
potentially available as a credit or deduction, subject to the
limitations generally applicable under the Code. The other Funds will
not qualify to make this election, and consequently their shareholders
will not report on their own tax returns their shares of the foreign
taxes paid by these Funds.

Municipal Bond Fund may acquire an option to "put" specified portfolio
securities to banks or municipal bond dealers from whom the securities
are purchased. See "Investment Practices - Stand-By Commitments." The
Fund has been advised by its legal counsel that it will be treated for
federal income tax purposes as the owner of the Municipal Securities
acquired subject to the put; and the interest on the Municipal
Securities will be tax-exempt to the Fund. Counsel has pointed out that
although the Internal Revenue Service has issued a favorable published
ruling on a similar but not identical situation, it could reach a
different conclusion from that of counsel. Counsel has also advised the
Fund that the Internal Revenue Service presently will not ordinarily
issue private letter rulings regarding the ownership of securities
subject to stand-by commitments.

The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury Regulations presently in effect, and
no attempt is made to describe special tax rules that may be applicable
to certain categories of shareholders, such as tax-exempt or tax-
deferred entities or retirement plans, insurance companies, and
financial institutions. For the complete provisions, reference should be
made to the pertinent Code sections and the Treasury Regulations
promulgated thereunder. The Code and these Treasury Regulations are
subject to change by legislative or administrative action either
prospectively or retroactively.

OTHER INFORMATION

Performance Information

From time to time a Fund may include its total return, average annual
total return, yield and current dividend return in advertisements and/or
other types of sales literature. These figures are computed separately for
Class 1, Class A and Class B shares of each Fund. These figures are based
on historical earnings and are not intended to indicate future
performance. The Company may include comparative performance information
in advertising or marketing the Portfolio's shares. Such performance
information may include data from the following industry and financial
publications: Barron's, Business Week, CDA Investment Technologies Inc.,
Changing Times, Forbes, Fortune, Institutional Investor, Investors Daily,
Money, Morningstar Mutual Fund Values, The New York Times, USA Today and
The Wall Street Journal.

Yield

A Portfolio's 30-day yield figure described below is calculated according
to a formula prescribed by the SEC. The formula can be expressed as
follows: YIELD = 2[( [(a-b/(c*d))/l] + 1)6 - 1], where

a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursement)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period

For the purpose of determining the interest earned (variable "a" in the
formula) on debt obligations purchased by the Portfolio at a discount or
premium, the formula generally calls for amortization of the discount or
premium; the amortization schedule will be adjusted monthly to reflect
changes in the market values of the debt obligations.

Investors should recognize that in periods of declining interest rates a
Portfolio's yield will tend to be somewhat higher than prevailing market
rates, and in periods of rising interest rates, the Portfolio's yield will
tend to be somewhat lower. In addition, when interest rates are falling,
the inflow of net new money to the Portfolio from the continuous sale of
its shares will likely be invested in portfolio instruments producing
lower yields than the balance of the Portfolio's investments, thereby
reducing the current yield of the Portfolio. In periods of rising
interest rates, the opposite can be expected to occur.

Average Annual Total Return

"Average annual total return" figures, as described below, are computed
according to a formula prescribed by the SEC. The formula can be
expressed as follows: P(l+T)/n = ERV, where:

P = a hypothetical initial payment of $ 1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a Hypothetical $ 1,000
investment made at the beginning of a 1-, 5- or
10-year period at the end of the 1-, 5- or 10-year
period (or fractional portion thereof), assuming
reinvestment of all dividends and distributions.

The average annual total return (computed in the manner described in the
Prospectus) and yield for each Fund are shown in the table below. These
results are based on historical earnings and asset value fluctuations
and are not intended to indicate future performance. Such information
should be considered in light of each Fund's investment objectives and
policies as well as the risks incurred in each Fund's investment
practices.
Class 1 Class A
Class B
Shares Shares
Shares

International Fund

i) total return for one year period ended
10/31/99 56.36% 61.69%
63.98%
ii) total return since inception
(based on inception date of 3/17/95) -- 22.62%
22.98%
iii) total return since inception
(based on inception date of 8/08/96) 21.23%
-- --

Large Cap Fund

i) total return for one year period ended
10/31/99 24.07% 28.47%
29.31%
ii) total return for five year period ended
10/31/99 21.40% --
--
iii) Total return for the ten year period ended
10/31/99 15.73% --
--
iv) total return since inception
(based on inception date of 4/14/87) 13.78%
-- --
v) total return since inception
(based on inception date of 8/18/96) -- 23.94%
24.63%

Growth and Income Fund

i) total return for one year period ended
10/31/99 10.05% 13.90%
14.03%
ii) total return for five year period ended
10/31/99 18.08% --
--
iii) total return for ten year period ended
10/31/99 13.67% --
--
iv) total return since inception
(based on inception date of 4/14/87) 12.06%
-- --
v) total return since inception
(based on inception date of 8/18/96) -- 18.75%
19.32%

The yield for Class A and Class B shares is not fixed and will fluctuate
in response to prevailing interest rates and the market value of
portfolio securities, and as a function of the type of securities owned
by the Fund, portfolio maturity and the Fund's expenses.

Yield and total return for the Government Fund and the Municipal Bond
Fund are computed separately for each class of shares.

The Funds may illustrate in advertising materials the use of a Payroll
Deduction Plan as a convenient way for business owners to help their
employees set up either IRA or voluntary mutual fund accounts. The
Funds may illustrate in advertising materials retirement planning
through employee contributions and/or salary reductions. Such
advertising material will illustrate that employees may have the
opportunity to save for retirement and reduce taxes by electing to defer
a portion of their salary into a special mutual fund IRA account. The
Funds may illustrate in advertising materials that Uniform Gift to
Minors Act accounts may be used as a vehicle for saving for a child's
financial future. Such illustrations will include statements to the
effect that upon reaching the age of majority, such custodial accounts
become the child's property.

Shareholder Services

Uniform Gifts to Minors Act. The Company recognizes the importance to a
child of establishing a savings and investment plan early in life for
education and other purposes when the child becomes older. The
advantages of regular investment with interest or earnings compounding
over a number of years are great. In addition, taxes on these earnings
are assessed against the income of the child rather than the donor,
usually at a lower bracket.

Investors wishing to establish a UGMA account should call their
Financial Professional for an application. Individuals desiring to open
an account under UGMA are also advised to consult with a tax adviser
before establishing the account.

Individual Retirement Account. Any individual who has compensation or
earned income from employment or self-employment and who is under age
70 1/2 may establish an IRA. The limitation on an individual's annual
contribution to an IRA is the lesser of 100% of compensation or $2,000.

The Small Business Job Protection Act of 1996 changed the eligibility
requirements for participants in Individual Retirement Accounts
("IRAs"). Under these new provisions, if you or your spouse have earned
income, each of you may establish an IRA and make maximum annual
contributions equal to the lesser of earned income or $2,000. As a
result of this legislation, married couples where one spouse is non-
working may now contribute a total of $4,000 annually to their IRAs.

The Taxpayer Relief Act of 1997 changed the requirements for determining
whether or not you are eligible to make a deductible IRA contribution.
Under the new rules effective beginning January 1, 1998, if you are
considered an active participant in an employer-sponsored retirement
plan, you may still be eligible for a full or partial deduction
depending upon your combined adjusted gross income ("AGI"). For married
couples filing jointly for 1998 a full deduction is permitted if your
combined AGI is $50,000 or less ($30,000 for unmarried individuals); a
partial deduction will be allowed when AGI is between $50,000-$60,000
($30,000-$40,000 for an unmarried individual); and no deduction is
available when AGI is above $60,000 ($40,000 for an unmarried
individual). However, if you are married and your spouse is covered by
an employer-sponsored retirement plan, but you are not, you will be
eligible for a full deduction if your combined AGI is $150,000 or less.
A partial deduction is permitted if your combined AGI is between
$150,000-160,000, and no deduction is permitted when AGI is above
$160,000.

The rules applicable to so-called "Roth IRAs" differ from those
described above.

In addition, any individual, regardless of age, may establish a rollover
IRA to receive an eligible rollover distribution from an
employer-sponsored plan.

Simplified Employee Pension Plan (SEP) and Salary Reduction Simplified
Employee Pension Plan (SARSEP). A SEP/SARSEP is a means for an employer
to provide retirement contributions to IRAs for all employees, without
the complicated reporting and record keeping involved in a qualified
plan. Employees covered by a SEP/SARSEP can use the same IRA to receive
their own allowable IRA contribution.

Section 403(b)(7) Plan. Employees of certain exempt organizations and
schools can have a portion of their compensation set aside, and income
taxes attributable to such portion deferred, in a Section 403(b)(7)
plan. Teachers, school administrators, ministers, employees of
hospitals, libraries, community chests, funds, foundations, and many
others may be eligible. The employer must be an organization described
in Section 501(c)(3) of the Internal Revenue Code and must be exempt
from tax under Section 501(a) of the Code. In addition, any employee of
most public educational institutions is eligible if his employer is a
state or a political subdivision of a state, or any agency or
instrumentality of either. The employee is not taxed on the amount set
aside or the earnings thereon until the funds are withdrawn, normally at
retirement.

Transfer Agent

Citi Fiduciary Trust Company (the "transfer agent"), located at 125
Broad Street, New York, New York 10044, serves as the funds' transfer
and dividend-paying agent. Under the transfer agency agreement, the
transfer agent maintains the shareholder account records for the fund
handles certain communications between shareholders and the funds,
distributes dividends and distributions payable by the funds and
produces statements with respect to account activity for the funds' and
their shareholders. For these services, the transfer agent receives
fees from the funds computed on the basis of the number of shareholder
accounts that the transfer agent maintains for the funds during the
month and is reimbursed for out-of-pocket expenses.

Sub-Transfer Agent

PFPC Global Fund Services is located at 101 Federal Street, Boston,
Massachusetts 02110 and serves as the Sub-Transfer Agent for Other
Accounts.

The Company has engaged the services of PFS Shareholder Services,
located at 3100 Breckinridge Blvd., Bldg 200, Duluth, Georgia 30099-
0062, as the Sub-Transfer Agent for PFS Accounts.

Custody of Assets

Securities owned by the Company and all cash, including proceeds from
the sale of shares of the Company and of securities in the Company's
investment portfolio, are held by PNC Bank, National Association,
located at 17th and Chestnut Streets, Philadelphia, PA 19103, as
Custodian for each Fund other than International Fund. Chase Manhattan
Bank, located at Chase Metrotech Center, Brooklyn, NY 11245 serves as
Custodian for International Fund.

Shareholder Reports

Semi-annual statements are furnished to shareholders, and annually such
statements are audited by the independent accountants.

PFS ACCOUNTS

An Account Transcript is available at a shareholder's request, which
identifies every financial transaction in an account since it was
opened. To defray administrative expenses involved with providing
multiple years worth of information, there is a $15 charge for each
Account Transcript requested. Additional copies of tax forms are
available at the shareholder's request. A $10 fee for each tax form will
be assessed.

Additional information regarding the Sub-Transfer Agent's services may
be obtained by contacting the Client Services Department at (800) 544-
5445.

Legal Counsel

Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington,
D.C. 20036

Shareholder and Trustee Responsibility

Under the laws of certain states, including Massachusetts where the
Company was organized, shareholders of a Massachusetts business trust
may, under certain circumstances, be held personally liable as partners
for the obligations of the Company. However, the risk of a shareholder
incurring any financial loss on account of shareholder liability is
limited to circumstances in which the Company itself would be unable to
meet its obligations. The Declaration of trust contains an express
disclaimer of shareholder liability for acts or obligations of the
Company and provides that notice of the disclaimer may be given in each
agreement, obligation, or instrument which is entered into or executed
by the Company or Trustees. The Declaration of Trust provides for
indemnification out of Company property to any shareholder held
personally liable for the obligations of the Company and also provides
for the Company to reimburse such shareholder for all legal and other
expenses reasonably incurred in connection with any such claim or
liability.

Under the Declaration of Trust, the Trustees and Officers are not liable
for actions or failure to act; however, they are not protected from
liability by reason of their willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of their office. The Company will provide indemnification to its
Trustees and Officers as authorized by its By-Laws and by the 1940 Act
and the rules and regulations thereunder.

About the Company

The Company was organized on January 29, 1987 under the laws of The
Commonwealth of Massachusetts and is a business entity commonly known as
a ''Massachusetts business trust.'' It is a diversified, open-end
management investment company authorized to issue an unlimited number of
Class A, Class B and Class 1 shares of beneficial interest of $.01 par
value, in the Funds. Shares issued are fully paid, non-assessable and
have no preemptive or conversion rights. In the event of liquidation of
any Fund, shareholders of such Fund are entitled to share pro rata in
the net assets of the Fund available for distribution to shareholders.

As of December 31, 1997, the name of the Company was changed from the
Common Sense Funds Trust to Concert Investment Series(r).; and to the
Smith Barney Investment Series on September 11, 2000.

Shareholders are entitled to one vote for each full share held and to
fractional votes for fractional shares held in the election of Trustees
(to the extent hereafter provided) and on other matters submitted to the
vote of shareholders. Each class of shares represents interest in the
assets of each Fund and has identical voting, dividend, liquidation and
other rights on the same terms and conditions, except that the
distribution fees and service fees and any incremental transfer agency
fees related to each class of shares of each Fund are borne solely by
that class, and each class of shares of each Fund has exclusive voting
rights with respect to provisions of the Plan which pertains to that
class of each Fund. All shares have equal voting rights, except that
only shares of the respective Fund are entitled to vote on matters
concerning only that Fund. There will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such
time as less than a majority of the Trustees holding office have been
elected by shareholders, at which time the Trustees then in office will
call a shareholders' meeting for the election of Trustees. Shareholders
may, in accordance with the Declaration of Trust, cause a meeting of
shareholders to be held for the purpose of voting on the removal of
Trustees. Except as set forth above, the Trustees shall continue to hold
office and appoint successor Trustees.

As of August 30, 2000, no person was known to own beneficially or of
record as much as five percent of the outstanding shares of any Fund of
the Company.

PFS Investments acts as custodian for certain employee benefit plans and
individual retirement accounts.

Other Information Regarding Smith Barney Mutual Funds

In an industry where the average portfolio manager has seven years of
experience (source: ICI, 1998), the portfolio managers of Smith
Barney Mutual Funds average 21 years in the industry and 15 years with
the firm.

Smith Barney Mutual Funds offers more than 60 mutual funds. We
understand that many investors prefer an active role in allocating
the mix of funds in their portfolio, while others want the asset
allocation decisions to be made by experienced managers.

That's why we offer four "styles" of fund management that can be
tailored to suit each investor's unique financial goals.

Style Pure Series
Our Style Pure Series funds stay fully invested within their asset class
and investment style, enabling investors to make
asset allocation decisions in conjunction with their Salomon Smith
Barney Financial Consultant.

Classic Investor Series
Our Classic Investor Series funds offer a range of equity and fixed
income strategies that seek to capture opportunities across
asset classes and investment styles using disciplined investment
approaches.

The Concert Allocation Series
As a fund of funds, investors can select a Concert Portfolio that may
help their investment needs. As needs change, investors can
easily choose another long-term, diversified investment from our Concert
family.

Special Discipline Series
Our Special Discipline Series funds are designed for investors who are
looking beyond more traditional market categories: from
natural resources to a roster of state-specific municipal funds.

FINANCIAL STATEMENTS

The Company's Annual Report for the fiscal year ended October 31, 1999,
and Semi-Annual Report for the period ended April 30, 2000 are
incorporated herein by reference in its entirety

APPENDIX A

RATINGS OF MUNICIPAL BONDS, NOTES AND COMMERCIAL PAPER

Moody's Investors Service, Inc.

Aaa - Bonds that are rated "Aaa" are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.

Aa - Bonds that are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in "Aaa"
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present that make the long term
risks appear somewhat larger than in "Aaa" securities. A - Bonds that
are rated "A" possess many favorable investment attributes and are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be
present that suggest a susceptibility to impairment sometime in the
future.

Baa - Bonds that are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well.

Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection
of interest and principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.

B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.

Caa - Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to
principal or interest.

Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings.

C - Bonds which are rated C are the lowest class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

Note: The modifier 1 indicates that the security ranks in the higher end
of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower
end of its generic rating category.

Standard & Poor's

AAA - Debt rated "AAA" has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.

AA - Debt rated "AA" has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in small
degree.

A- Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt in
higher rated categories.

BBB - Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.

BB, B, CCC, CC, C - Debt rated 'BB', 'B', 'CCC', 'CC' or 'C' is
regarded, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with the
terms of the obligation. 'BB' indicates the lowest degree of speculation
and 'C' the highest degree of speculation. While such debt will likely
have some quality and protective characteristics, these are outweighed
by large uncertainties or major risk exposures to adverse conditions.
Plus (+) or Minus (-): The ratings from 'AA' to 'B' may be modified by
the addition of a plus or minus sign to show relative standing within
the major rating categories.

Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of
the project being financed by the debt being rated and indicates that
payment of debt service requirements is largely or entirely dependent
upon the successful and timely completion of the project. This rating,
however, while addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood of, or the risk of default
upon failure of, such completion. The investor should exercise judgment
with respect to such likelihood and risk.

L - The letter "L" indicates that the rating pertains to the principal
amount of those bonds where the underlying deposit collateral is fully
insured by the Federal Savings & Loan Insurance Corp. or the Federal
Deposit Insurance Corp.

+ - Continuance of the rating is contingent upon S&P's receipt of
closing documentation confirming investments and cash flow.

* - Continuance of the rating is contingent upon S&P's receipt of an
executed copy of the escrow agreement.

NR - Indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.

Fitch IBCA, Inc.

AAA - Bonds rated AAA by Fitch have the lowest expectation of credit
risk. The obligor has an exceptionally strong capacity for timely
payment of financial commitments which is highly unlikely to be
adversely affected by foreseeable events.

AA - Bonds rated AA by Fitch have a very low expectation of credit risk.
They indicate very strong capacity for timely payment of financial
commitment. This capacity is not significantly vulnerable to foreseeable
events.

A - Bonds rated A by Fitch are considered to have a low expectation of
credit risk. The capacity for timely payment of financial commitments is
considered to be strong, but may be more vulnerable to changes in
economic conditions and circumstances than bonds with higher ratings.

BBB - Bonds rated BBB by Fitch currently have a low expectation of
credit risk. The capacity for timely payment of financial commitments is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to impair this capacity. This is
the lowest investment grade category assigned by Fitch.

BB - Bonds rated BB by Fitch carry the possibility of credit risk
developing, particularly as the result of adverse economic change over
time. Business or financial alternatives may, however, be available to
allow financial commitments to be met. Securities rated in this category
are not considered by Fitch to be investment grade.

B - Bonds rated B by Fitch carry significant credit risk, however, a
limited margin of safety remains. Although financial commitments are
currently being met, capacity for continued payment depends upon a
sustained, favorable business and economic environment.

CCC, CC, C - Default on bonds rated CCC, CC, and C by Fitch is a real
possibility. The capacity to meet financial commitments depends solely
on a sustained, favorable business and economic environment. Default of
some kind on bonds rated CC appears probable, a C rating indicates
imminent default.

Plus and minus signs are used by Fitch to indicate the relative position
of a credit within a rating category. Plus and minus signs however, are
not used in the AAA category.

COMMERCIAL PAPER RATINGS

Moody's Investors Service, Inc.

Issuers rated "Prime-1" (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations.
Prime-1 repayment will normally be evidenced by the following
characteristics: leading market positions in well-established
industries; high rates of return on funds employed; conservative
capitalization structures with moderate reliance on debt and ample asset
protection; broad margins in earnings coverage of fixed financial
changes and high internal cash generation; well-established access to a
range of financial markets and assured sources of alternate liquidity.

Issuers rated "Prime-2" (or related supporting institutions) have strong
capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to
a lesser degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.

Standard & Poor's

A-1 - This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issuers
determined to possess overwhelming safety characteristics will be
denoted with a plus (+) sign designation.

A-2 - Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for
issues designated A-1.

Fitch IBCA, Inc.

Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years,
including commercial paper, certificates of deposit, medium-term notes
and municipal and investment notes.

The short-term rating places greater emphasis than a long-term rating on
the existence of liquidity necessary to meet financial commitment in a
timely manner.

Fitch's short-term ratings are as follows:

F1+ - Issues assigned this rating are regarded as having the strongest
capacity for timely payments of financial commitments. The "+" denotes
an exceptionally strong credit feature.

F1 - Issues assigned this rating are regarded as having the strongest
capacity for timely payment of financial commitments.

F2 - Issues assigned this rating have a satisfactory capacity for timely
payment of financial commitments, but the margin of safety is not as
great as in the case of the higher ratings.

F3 - The capacity for the timely payment of financial commitments is
adequate; however, near-term adverse changes could result in a reduction
to non investment grade.

Duff & Phelps Inc.

Duff 1+ - Indicates the highest certainty of timely payment: short-term
liquidity is clearly outstanding, and safety is just below risk-free
United States Treasury short-term obligations.

Duff 1 - Indicates a high certainty of timely payment.

Duff 2 - Indicates a good certainty of timely payment: liquidity factors
and company fundamentals are sound. The Thomson BankWatch ("TBW")

TBW-1 - Indicates a very high degree of likelihood that principal and
interest will be paid on a timely basis.

TBW-2 - While the degree of safety regarding timely repayment of
principal and interest is strong, the relative degree of safety is not
as high as for issues rated TBW-1.

Part C. Other Information

Item 23. Exhibits.

(a)(1) Agreement and Declaration of Trust
dated
January 29, 1987. (Incorporated herein by
reference to Form N-1A of Registrant's
Post-Effective Amendment No. 18, filed on
February 28, 1997.)

(2) Certificate of Designation of Common Sense
Money Market Fund dated September 30, 1987.
(Incorporated herein by reference to
Form N-1A of Registrant's Post-Effective
Amendment No. 18, filed on February 28,
1997.)

(3) Certificate of Designation Common Sense
Municipal Bond Fund dated April 4, 1988.
(Incorporated herein by reference to
Form N-1A of Registrant's Post-Effective
Amendment No. 18, filed on February 28,
1997.)

(4) Certificate of Resolution dated January 8,
1992. (Incorporated herein by reference to
Form N-1A of Registrant's Post-Effective
Amendment No. 18, filed on February 28,
1997.)

(5) Certificate of Amendment dated January 20,
1994. (Incorporated herein by reference to
Form N-1A of Registrant's Post-Effective
Amendment No. 18, filed on February 28,
1997.)

(6) Certificate of Designation of Common Sense II
Aggressive Opportunity Fund dated January 27,
1994. (Incorporated herein by reference to
Form N-1A of Registrant's Post-Effective
Amendment No. 18, filed on February 28,
1997.)

(7) Certificate of Designation of Common Sense II
Government Fund dated January 27, 1994.
(Incorporated herein by reference to
Form N-1A of Registrant's Post-Effective
Amendment No. 18, filed on February 28,
1997.)

(8) Certificate of Designation of Common Sense II
Growth Fund dated January 27, 1994.
(Incorporated herein by reference to
Form N-1A of Registrant's Post-Effective
Amendment No. 18, filed on February 28,
1997.)

(9) Certificate of Designation of Common Sense II
Growth and Income Fund dated January 27,
1994. (Incorporated herein by reference to
Form N-1A of Registrant's Post-Effective
Amendment No. 18, filed on February 28,
1997.)

(10) Certificate of Amendment of the Agreement and
Declaration of Trust dated May 10, 1996.
(Incorporated herein by reference to
Form N-1A of Registrant's Post-Effective
Amendment No. 18, filed on February 28,
1997.)

(11) Amended and Restated Certificate of
Designation of Common Sense II Emerging
Growth Fund dated May 10, 1996. (Incorporated
herein by reference to Form N-1A of
Registrant's Post-Effective Amendment No. 18,
filed on February 28, 1997.)

(12) Amended and Restated Certificate of
Designation of Common Sense II International
Equity Fund dated May 10, 1996. (Incorporated
herein by reference to Form N-1A of
Registrant's Post-Effective Amendment No. 18,
filed on February 28, 1997.)

(13) Amended and Restated Certificate of
Designation of Common Sense Money Market Fund
dated May 10, 1996. (Incorporated herein by
reference to Form N-1A of Registrant's
Post-Effective Amendment No. 18, filed on
February 28, 1997.)

(14) Amended and Restated Certificate of
Designation of Common Sense Municipal Bond
Fund dated May 10, 1996. (Incorporated herein
by reference to Form N-1A of Registrant's
Post-Effective Amendment No. 18, filed on
February 28, 1997.)

(15) Certificate of Amendment Amending the Amended
and Restated Certificate of Designation of
Common Sense Emerging Growth Fund dated
July 2, 1996. (Incorporated herein by
reference to Form N-1A of Registrant's
Post-Effective Amendment No. 18, filed on
February 28, 1997.)

(16) Certificate of Amendment Amending the Amended
and Restated Certificate of Designation of
Common Sense International Equity Fund dated
July 2, 1996. (Incorporated herein by
reference to Form N-1A of Registrant's
Post-Effective Amendment No. 18, filed on
February 28, 1997.)

(17) Certificate of Amendment of the Agreement and
Declaration of Trust dated December 30, 1997 incorporated by
reference to Registrant's Amendment No. 21, filed on December 15,
1998.

(18) Form of Certificate of Designation of Mid Cap Fund
dated February 17, 1999 is incorporated by reference to Registrant's
Amendment No. 22, filed on February 26, 1999.

(19) Form of Certificate of Amendment of the Agreement
and Declaration of Trust dated September 7, 2000 is filed herewith.

(b) Bylaws as amended July 10, 1996.
(Incorporated herein by reference to
Form N-1A of Registrant's Post-Effective
Amendment No. 18, filed on February 28,
1997.)

(c)(1) Specimen copy of certificate for Share
of Beneficial Interest in Common Sense Trust for Class A shares.
(Incorporated herein by reference to Form
N-1A of Registrant's Post-Effective Amendment
No. 17, filed on March 21, 1996.)

(2) Specimen copy of certificate for Share of
Beneficial Interest
in Common Sense Trust for Class B shares.
(Incorporated herein by reference to Form
N-1A of Registrant's Post-Effective Amendment
No. 17, filed on March 21, 1996.)

(3) Specimen copy of certificate for Share of
Beneficial Interest
in Common Sense Trust for Class 1 shares.
(Incorporated herein by reference to Form
N-1A of Registrant's Post-Effective Amendment
No. 17, filed on March 21, 1996.)

(d) Form of Investment Advisory Agreement for
Concert Investment Series (Incorporated herein by reference
to Form N-1A of Registrant's Post-Effective
Amendment No. 20, filed on February 27, 1998).

(e)(1) Distribution Agreement with CFBDS, Inc. is
incorporated by reference to Registrant's Amendment No. 21, filed on
December 15, 1998.

(e)(2) Form of Distribution Agreements with Salomon
Smith Barney Inc. and PFS Distributors, Inc., dated June 5, 2000 is
filed herewith.

(2) Form of Dealer Agreement is incorporated by
reference to Registrant's Post-Effective Amendment No. 22, filed on
February 26, 1999.

(f) Retirement Plan for Directors is incorporated
by reference to Registrant's Post-Effective Amendment No. 22, filed
on February 26, 1999.

(g) Form of Custodian Agreements (Incorporated
herein by reference to Form N-1A of Registrant's Post-Effective
Amendment No. 20, filed on February 27, 1998).

(h)(1) Form of Transfer Agency Agreement
(Incorporated herein by reference to Form N-1A of Registrant's Post-
Effective
Amendment No. 20, filed on February 27, 1998).

(h)(2) Form of Sub-Transfer Agency Agreement
(Incorporated herein by reference to Form N-1A of Registrant's Post-
Effective Amendment No. 20, filed on February 27, 1998).

(i) Previously filed.

(j) Consent of Independent Auditors filed
herewith.

(k) Not applicable.

(l)(1) Investment Letter for Common Sense
Funds.
(Incorporated by reference to Exhibit 13
filed with Pre-Effective Amendment No. 2,
filed March 31, 1987.)

(l)(2) Investment Letter for Common Sense II
Funds dated May 2, 1994. (Incorporated herein by
reference to Exhibit 13.2 filed with
Post-Effective Amendment No. 12, filed
October 28, 1994.)

(l)(3) Investment Letter for Common Sense II
Emerging Growth Fund and Common Sense II
International Equity Fund (Incorporated
herein by reference to Exhibit 13.3 filed
with Post-Effective Amendment No. 15, filed
August 11, 1995).

(m)(1) Form of Amended and Restated Class A
Distribution Plan is incorporated by reference to Registrant's Post-
Effective Amendment No. 22, filed on February 26, 1999.

(m)(2) Form of Amended and Restated Class B
Distribution Plan is incorporated by reference to Registrant's Post-
Effective Amendment No. 22, filed on February 26, 1999.

(m)(3) Form of Amended and Restated Servicing
Agreement for Class A shares is incorporated by reference to
Registrant's Post-Effective Amendment No. 22, filed on February 26,
1999.

(m)(4) Form of Amended and Restated Servicing
Agreement for Class B shares is incorporated by reference to
Registrant's Post-Effective Amendment No. 22, filed on February 26,
1999.

(n) Financial Data Schedule filed herewith.

(o) Rule 18f-3 Plan. (Incorporated herein by
reference to Form N-1A of Registrant's
Post-Effective Amendment No. 18, filed on
February 28, 1997.)

(p) Code of Ethics filed herewith.

Item 24. Persons Controlled by or under Common Control with
Registrant.

None

Item 25. Indemnification.

Item 25 is incorporated herein by reference to Form N-1A of
Registrants Registration No. 33-11716, Post Effective Amendment
No. 11, filed on March 2, 1994.

Item 26. Business and Other Connections of Investment Adviser

Investment Adviser - SSB Citi Fund Management LLC, successor to SSBC
Fund Management Inc. and formerly known as Mutual Management Corp.
("SSB Citi").

SSB Citi, through its predecessors, has been in the investment
counseling business since 1934 and was incorporated in
December 1968 under the laws of the State of Delaware. SSB Citi
is a wholly owned subsidiary of Salomon Smith Barney
Holdings Inc., which in turn is a wholly owned subsidiary
of Citigroup Inc. SSB Citi is registered as an
investment adviser under the Investment Advisers Act of 1940
(the "Advisers Act").

The list required by this Item 26 of the officer and
directors of SSB Citi together with information as to any other
business, profession, vocation or employment of a
substantial nature engaged in by such officer and directors
during the past two fiscal years, is incorporated by
reference to Schedules A and D of FORM ADV filed by SSB Citi
pursuant to the Advisers Act (SEC File No. 801-8314).

Item 27. Principal Underwriters.

(a) Salomon Smith Barney Inc., ("SSB"), the Registrant's Co-
Distributor, is also the distributor for the following Smith
Barney funds: Concert Investment Series, Consulting Group
Capital
Markets Funds, Greenwich Street Series Fund, Smith Barney
Adjustable Rate Government Income Fund, Smith Barney
Aggressive
Growth Fund Inc., Smith Barney Appreciation Fund Inc., Smith
Barney Arizona Municipals Fund Inc., Smith Barney California
Municipals Fund Inc., Smith Barney Concert Allocation Series
Inc.,
Smith Barney Equity Funds, Smith Barney Fundamental Value Fund
Inc., Smith Barney Funds, Inc., Smith Barney Income Funds,
Smith
Barney Institutional Cash Management Fund, Inc., Smith Barney
Investment Funds Inc., Smith Barney Investment Trust, Smith
Barney
Managed Governments Fund Inc., Smith Barney Managed Municipals
Fund Inc., Smith Barney Massachusetts Municipals Fund, Smith
Barney Money Funds, Inc., Smith Barney Muni Funds, Smith
Barney
Municipal Money Market Fund, Inc., Smith Barney New Jersey
Municipals Fund Inc., Smith Barney Oregon Municipals Fund
Inc.,
Smith Barney Principal Return Fund, Smith Barney Sector Series
Inc., Smith Barney Small Cap Blend Fund, Inc., Smith Barney
Telecommunications Trust, Smith Barney Variable Account Funds,
Smith Barney World Funds, Inc., Travelers Series Fund Inc.,
and
various series of unit investment trusts.

PFS Distributors, Inc. the Registrant's Co-Distributor, is
also
the distributor for the following Smith Barney funds: Concert
Investment Series, Smith Barney Investment Funds, Smith Barney
Aggressive Growth Fund Inc., Smith Barney Appreciation Fund
Inc.,
Smith Barney Concert Allocation Series Inc., Smith Barney
Fundamental Value Fund Inc., Smith Barney Fundamental Value
Fund
Inc., Smith Investment Funds, Smith Barney Money Funds, Inc.,
and
Smith Barney Income Funds.

(b) The information required by this Item 27 with respect to
each director and officer of SSB and PFS is incorporated by
reference to Schedule A of Form BD filed by SSB and PFS
pursuant
to the Securities and Exchange Act of 1934 (File Nos. 812-
85107
and 8-37352).

Item 28. Location of Books and Records.

All accounts, books and other documents required by
Section 31(a) of the Investment Company Act of 1940 and the Rules
thereunder to be maintained (i) by Registrant will be maintained at
its offices, located at 388 Greenwich Street, 22nd Floor, New York,
NY 10013, PFS Shareholder Services,
3100 Breckinridge Blvd., Bldg. 200, Duluth, Georgia 30199-0062, or at
PNC Bank,National Association, 17th and Chestnut Streets,
Philadelphia, Pennsylvania 19103 or Chase Manhattan Bank, Chase
Metrotech Center, Brooklyn, New York 11245; (ii) by SSB Citi as the
Adviser, will be maintained at its offices, located at 388 Greenwich
Street, 22nd Floor, New York, NY 10013; and (iii) by
the Distributor, the principal underwriter, will be maintained at its
offices located at SSB, 388 Greenwich Street, 22nd Floor, New York,
NY 10013.

Item 29. Management Services.

There are no management related services contracts not
discussed in Part A or Part B.

Item 30. Undertakings.

None.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the
Registrant, SMITH BARNEY INVESTMENT SERIES, certifies that it meets
all requirements for effectiveness of this registration statement
under Rule 485(b) under the Securities Act and has duly caused this
Post-Effective Amendment No. 26 to its Registration Statement on Form
N-1A to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, on the 11th day of September,
2000.

SMITH BARNEY INVESTMENT SERIES

By /s/ HEATH B. MCLENDON
Heath B. McLendon
Chairman of the Board
and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment to the Registration Statement and the above
Power of Attorney has been signed below by the following persons in
the capacities and as of the dates indicated.

Signature: Title: Date:

/s/Heath B. McLendon Chairman of the Board September 11, 2000
Heath B. McLendon (Chief Executive
Officer)

/s/ Lewis E. Daidone Senior Vice President September 11, 2000
Lewis E. Daidone and Treasurer (Chief
Financial and
Accounting Officer)

/s/ Donald M. Carlton* Trustee September 11, 2000
Donald M. Carlton

/s/ A. Benton Cocanougher* Trustee September 11, 2000
A. Benton Cocanougher

/s/ Stephen R. Gross* Trustee September 11, 2000
Stephen R. Gross

/s/ Alan G. Merten* Trustee September 11, 2000
Alan G. Merten

/s/ R. Richardson Pettit* Trustee September 11, 2000
R. Richardson Pettit

*Signed by Heath B. McLendon, their duly authorized attorney-in-fact,
pursuant to power of attorney dated February 27, 1998.

EXHIBIT INDEX

a.19. Form of Certificate of Amendment of the Agreement and
Declaration of Trust dated September 7, 2000
e.2. Form of Distribution Agreements with Salomon Smith Barney Inc.
and PFS Distributors, Inc., dated June 5, 2000.
j. Consent of Independent Auditors
n. Financial Data Schedules
p. Code of Ethics